CareDx, Inc (CDNA) Q3 2026 Earnings Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the CareDx Q3 2026 Earnings Call. [Operator Instructions] I will now hand the conference over to Nina Deka, CareDx Head of Investor Relations. Nina, please go ahead.

Nina Deka: Thank you, operator. Good afternoon. Thank you for joining us today. Earlier today, CareDx released financial results for the third quarter 2026 ending September 30, 2026. The results and our earnings presentation are available on the company's website at caredx.com. Joining me on today's call are John Hanna, President and Chief Executive Officer; and Keith Kennedy, Chief Operating Officer and Chief Financial Officer. Before we get started, I would like to remind everyone that management will be making statements during this call that include forward-looking statements. Any statements contained in this call that are not statements of historical facts should be deemed to be forward-looking statements. All forward-looking statements are based upon current estimates and various assumptions. These statements involve material risks and uncertainties that can cause actual results to differ materially from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. Information concerning the risks, uncertainties and other factors that could cause results to differ from these forward-looking statements is included in our filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, October 29, 2026. We disclaim any intention or obligation, except as required by law, to update or revise any information, financial projections or other forward-looking statements, whether because of new information, future events or otherwise. This call will also include a discussion of certain non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, not as a substitute or in isolation from GAAP measures. Reconciliations of our non-GAAP financial measures to the most directly comparable GAAP financial measures may be found in today's earnings release or investor presentation, which are posted on our website. With that, I will now turn the call over to John.

John Hanna: Thank you, Nina. Good afternoon, everyone, and thank you all for joining us today. We had another strong quarter of solid execution, extending our leadership in transplantation, expanding into specialty oncology and preparing for our entrance into cell therapy. As a reminder, our strategy is to focus on markets where we believe our core competencies give us the right to win, markets where patients face a high burden of disease and are managed by a concentrated group of subspecialty providers, where the high cost of treatment and disease management warrants repeat molecular testing and where our solution selling approach, including integrated testing, digital solutions and pharmacy can create a competitive advantage. In my conversations with clinicians across transplantation, oncology and cell therapy over the past quarter, the feedback is consistent. Clinicians want actionable precision molecular information about their patient's disease status and how it is changing over time to inform treatment decisions. Across these markets, our approach to driving growth is consistent, generate the evidence that builds clinical belief and make testing easier to integrate into practice workflows. Today, I'll cover our progress across the growth drivers we use to execute this strategy, our pipeline, the evidence we're generating and how we're executing in the market, including specialty oncology. I'm also excited to share later in my prepared remarks a new facet to our strategy and how we build meaningful connections with patients throughout their care journey. But first, let's talk about our pipeline. Innovation remains central to maintaining our leadership position, applying CareDx strengths in new markets and expanding our addressable market. Both of our organic pipeline programs are on track. For each pipeline program, we begin by generating evidence well before launch, so clinicians have the data they need to evaluate the test and understand how it can inform patient care. Let me start with AlloHeme. We continue to advance AlloHeme, our recurrence monitoring test for patients undergoing cell therapy to treat AML and MDS hematologic malignancies. Designed as a universal assay for cell therapy patients without reliance on a specific disease mutation, AlloHeme represents an organic expansion of our capabilities into a market where we believe we have the potential to establish a differentiated leadership position. The ACROBAT Clinical Validation Steering Committee has submitted the initial trial manuscript for peer review. Recall, at Tandem earlier this year, the authors demonstrated that AlloHeme identified molecular relapse, a median of 41 days before clinical diagnosis. We remain on track to complete CLIA readiness activities before year-end, supporting a planned commercial launch in the first quarter of 2027. HistoMap Kidney, which adds a layer of molecular insights to tissue biopsy assessment complementing AlloSure Kidney blood-based monitoring is also on track. This quarter, a second independent validation study performed in conjunction with investigators at the University of Wisconsin was published in the peer-reviewed journal, Transplantation. HistoMap's molecular classification exhibited robust concordance across established rejection categories. Importantly, the authors evaluated a subgroup of patients diagnosed with microvascular inflammation or MVI. Previously, this pathology was often interpreted as no rejection. The clinical significance of this phenotype was elevated by a recent study published in the New England Journal of Medicine, which found that these patients had a significantly greater risk of graft loss than previously believed. In the Transplantation article, HistoMap was able to identify 2 subgroups of patients with MVI that had meaningfully different long-term graft outcomes. Over a follow-up of up to 6 years, 50% of patients molecularly classified by HistoMap as having a high risk of rejection experienced graft loss compared with 15% of those classified by HistoMap as having a low risk of rejection. This more than threefold difference demonstrates HistoMap's potential to identify clinically meaningful risk in the setting of MVI beyond conventional pathology. We remain focused on completing HistoMap CLIA readiness activities before year-end in support of a broader commercial availability in 2027. And as a reminder, in liver transplantation, we continue to collect and analyze follow-up data from patients enrolled in MAPLE, our multicenter prospective clinical validation study. Evidence generation is central to how we advance our pipeline. We are building the evidence needed to demonstrate clinical value and support future adoption and coverage. Turning now to evidence generation for our on-market products, evidence is how we build belief in molecular testing as standard of care. Our medical affairs team continues to strengthen the foundation for long-term growth by advancing clinical confidence in our testing portfolio and supporting the translation of evidence into clinical practice. I'll start with specialty oncology and then turn to transplant. In specialty oncology, NavDx is used for molecular residual disease or MRD testing in HPV-driven cancers with surveillance as its first established context of use. Investigators are now exploring additional contexts of use, including radiation deescalation in HPV-driven head and neck cancer. This is an important clinical question because the burden of radiation for head and neck cancer can be profound. Treatment typically lasts for 6 weeks to 7 weeks and the cumulative effects can make it difficult for patients to swallow, maintain nutrition and manage everyday life with some effects persisting long after treatment ends. If clinicians could safely reduce that burden for selected patients while maintaining disease control even a shorter course or lower dose, that de-escalation could be meaningful. At the American Society of Radiation Oncology Conference, or ASTRO, 2 independent Phase II studies utilizing NavDx in distinct radiation deescalation settings were presented. The first evaluated radiation after surgery. In an independent prospective multicenter study, investigators at Emory and Vanderbilt used postoperative NavDx results to guide the subsequent radiation dose and treatment area. Among 35 patients, the study reported 97% control of the cancer in the treated region at 12 months and 24 months, along with favorable patient-reported swallowing function at 1 year. These findings are early, but they illustrate one potential context of use for precision molecular information following surgery. The second study from Ohio State evaluated patients receiving radiation as their primary treatment. Investigators measured NavDx kinetics during treatment to determine which patients would receive a reduced radiation dose. In the first 15 patients, 12 had a greater than 95% decline in their NavDx score by week 4 and received a lower radiation dose than the current standard. All 12 achieved a complete response at 3 months with no cancer returning in the treated region at the interim analysis. Longer follow-up will be important, but the study demonstrates how NavDx is being evaluated to tailor radiation based on an individual patient's response. Together, these 2 Phase II trials evaluated 2 distinct contexts of use, guiding radiation after surgery and adapting definitive radiation during treatment to safely reduce the burden of radiation for selected patients while maintaining disease control. At ASTRO, more than 20 trials were highlighted exploring radiation deescalation in this setting, underscoring the level of clinical interest in determining which patients may safely receive a lower dosage. A new study is also evaluating NavDx during the initial period after definitive radiation treatment and before the standard of care imaging assessment at month 3. A newly published 8-center study in clinical cancer research led by investigators at Mount Sinai and Dana-Farber Cancer Institute evaluated 332 patients during this early post-treatment period. Patients whose results remained positive faced a much greater risk of recurrence, while no recurrences were observed among those whose results later became negative. The findings highlight the potential prognostic value of molecular results before the standard 3-month imaging assessment. This illustrates how the evidence could expand NavDx beyond established surveillance and into additional treatment decisions across the patient journey. Turning to solid organ transplant. This fall, both at the Banff meeting on Transplant Pathology and the American Society of Nephrology Kidney Week, or ASN, we presented new evidence that further demonstrates how molecular testing can help clinicians assess rejection risk, inform monitoring and navigate some of the most difficult decisions in kidney transplant care. One of the key analyses comes from our KOAR registry and looks at a particularly challenging clinical scenario, patients with borderline changes or T cell-mediated rejection seen on biopsy where histology alone does not always predict who is at risk. In 131 patients, an AlloSure kidney result of 1% or higher around the time of biopsy was independently associated with a nearly threefold higher risk of graft loss or a decline in kidney function of 30% or more. This could help clinicians identify higher-risk patients who may benefit from closer monitoring, reinforcing AlloSure's role in informing care beyond a signal diagnostic decision. At ASN, investigators from the Paris Transplant group presented results from a multinational randomized trial of 332 kidney transplant recipients. Patients monitored using an AlloSure-based monitoring strategy underwent 49% fewer biopsies between months 3 and 12 with similar rates of death, graft loss and acute rejection and no statistically significant difference in kidney function at 12 months. This is important prospective evidence supporting the potential for molecular monitoring to reduce invasive procedures while maintaining comparable outcomes. Demonstrating that AlloSure-based monitoring strategy can reduce invasive biopsies while maintaining similar clinical outcomes strengthens the clinical and health economic rationale for broader protocol adoption and payer coverage. Together, these findings demonstrate the growing breadth of the AlloSure Kidney evidence base, helping clinicians assess risk when biopsy findings are ambiguous and informing monitoring strategies designed to reduce unnecessary procedures. Across the solid organ transplant and specialty oncology portfolios, we are focused not only on demonstrating test performance, but also on showing how our solutions can inform more clinical decisions and create value for patients, providers and payers. That evidence is central to expanding use across our established portfolio and advancing our pipeline toward launch, reimbursement and future coverage. Turning now to go-to-market. Since we closed the acquisition of NavDx on July 1, we've been executing against the 3 specialty oncology integration priorities I outlined last quarter, and I want to update you on each. First, we are leveraging our commercial capabilities to expand adoption of NavDx. We started the expansion of our field team to build belief in NavDx testing as a standard of care for HPV-driven cancers. That added commercial and medical presence is intended to drive deeper adoption of protocols for MRD surveillance. In addition, our customer service team is making it easier for patients to access NavDx testing through blood draw scheduling and our national mobile phlebotomy network. Second, we are applying our clinical workflow optimization expertise to simplify the customer experience and support longitudinal testing. We have enabled electronic ordering through our care portal and see growing use of standard orders for surveillance testing and are integrating NavDx ordering into Epic Aura. We currently expect Epic-based ordering to begin by January 1, 2027. Third, we are strengthening revenue cycle management execution. On October 1, we moved NavDx onto our CareDx billing platform and brought in-house 100% of our RCM workflows, creating a more scalable operational foundation. As Keith will review, we are already seeing RCM collections momentum with NavDx. We believe these go-to-market workflow optimization and operational scale efforts position us to sustain NavDx growth through 2027, consistent with the guidance we shared when we announced the transaction. These are the same core capabilities that have made us the leader in solid organ transplant that we are now applying across specialty oncology. We have a repeatable model for translating differentiated science into clinically valuable solutions and bringing them to clinicians and patients at scale. Turning now to solid organ transplant go-to-market execution. First, I want to say that we are encouraged to see kidney disease elevated on the national agenda with the release of the new Health and Human Services Kidney Care National plan. The scale of the need is profound. An estimated 36 million American adults are living with chronic kidney disease, and most do not even know that they have it. More than 800,000 Americans are living with kidney failure, including approximately 0.5 million receiving dialysis and the hope of a transplant. More than 90,000 people remain on the kidney transplant waitlist while only approximately 28,000 kidney transplants are performed each year. The asymmetry between the supply of transplantable organs and the demand is dramatic. Behind those numbers are patients and families living with the physical burden of dialysis and uncertainty of waiting and the hope that a transplant can offer a longer and fuller life. The Kidney Care National plan recognizes the importance of preventing kidney failure where possible while expanding access to transplantation and encouraging innovation. We strongly share that goal, helping more patients who need a transplant receive one and supporting them throughout the transplant journey. Against that backdrop, transplant testing grew 21% in the quarter. We believe that momentum reflects our differentiated clinical evidence and continued investments in field execution, protocol adoption and workflow integration. We increased our engagement with transplant centers, supported broader implementation of testing protocols, particularly in kidney and lung and continue to make our solutions easier to incorporate into clinical practice. We now have 21 centers live on Epic Aura, bringing ordering, results and longitudinal testing history into existing clinical workflows. We anticipate that we will achieve our goal of half our transplant orders flowing through EMR integrations by year-end. We are also building stronger connections with patients throughout their care journey with the goal of helping them remain informed, engaged and connected to ongoing monitoring. In Q3, we launched our new patient website, www.caredx.com/patients, a home for kidney, heart and lung transplant patients and caregivers. We want patients to feel supported long after surgery and to understand why ongoing monitoring matters. We believe greater engagement can support adherence and help patients stay connected to their care journey. Our new patient portal builds on that experience by connecting patients more directly to their AlloSure results. As of this week, more than 5,000 patients have already registered for the portal. It gives them a simple way to access their latest results, see how those results have changed over time and find relevant information that can help them understand the results in context. This addresses an important need for transplant patients who want to remain informed and connected to their care between visits. It is another way that we are differentiating not only through our tests, but through the experience and support that we build around them. Now I'd like to turn it over to Keith to walk you through our financial results. Keith?

Keith Kennedy: Thank you, John. I plan to cover our third quarter 2026 financial results and our updated 2026 guidance. We signed and closed the sale of our lab products business in the second quarter. So the first half of 2026 represents the full year results for that business. Any transition services or other costs are included in our third quarter results. We are substantially complete with transition services. On July 1, 2026, we closed the acquisition of our Specialty oncology business, which is included in testing services. Please refer to our SEC disclosures and financial statements for unaudited pro forma financial information. To illustrate growth on a comparable basis or relative performance, I may present our results combined with Naveris' reported results from periods prior to the acquisition, which are not included in our reported results. Turning to the financial highlights section of our earnings presentation on Slide 12. For the third quarter 2026 and our year-over-year results, revenue of $139 million increased 39%. Testing volume of 75,900 tests increased 51%. Non-GAAP gross margin of 74% increased from 71% -- adjusted EBITDA of $30 million or 22% of revenue doubled from $15 million, and we ended the quarter with $250 million in cash and cash equivalents and no debt. We generated $13 million in cash flow from operations this quarter, including $11 million in seller-funded transaction expenses that we paid post close and $1.5 million in option-related compensation paid post close to our specialty oncology employees. Turning to Slide 13. The chart on the left illustrates total reported revenue of $139 million or 39% increase year-over-year and 6% sequentially, driven by higher-margin testing services. Total revenue this quarter includes $15 million in out-of-period revenue, up from $6 million in the prior year quarter. Excluding out-of-period revenue in both periods, total revenue grew 32% year-over-year and 7% sequentially. The 3 charts on the right provide revenue by segment. Testing services revenue, the next chart, shows our third quarter revenue of $119 million, which increased 65% year-over-year and 19% sequentially and now represents 86% of our revenue, up from 72% in the prior year quarter. Testing revenue of $119 million includes $15 million of out-of-period revenue, ahead of our $8 million prior estimate and up from $6 million in the prior year quarter. Excluding out-of-period revenue, testing services revenue increased 58% year-over-year and 24% sequentially and transplant revenue alone increased 39% year-over-year and 9% sequentially. Testing services revenue also includes specialty oncology revenue of $12.5 million. We do not record revenue prior to an acquisition. But for illustrative purposes compared to Naveris' reported results prior to this acquisition, Specialty oncology revenue grew 37% year-over-year and 5% sequentially, which was at the higher end of our previously estimated range of 30% to 40%. As John previously stated, we are increasing our investment in the specialty oncology commercial organization to expand our reach and frequency in this market. The next chart on the right illustrates the growth in our patient and digital business, which grew 31% year-over-year and 5% sequentially. And the last chart shows the revenue from our lab products business prior to the sale on June 30. Turning to Slide 14. Testing volume continued to ramp with third quarter volume of 75,900 tests, up 51% year-over-year and 31% sequentially. Transplant volume of 50,750 tests increased 21% year-over-year and 5% sequentially, above our historic Q2 to Q3 trend. Specialty oncology volume was 15,150 tests in the third quarter. For illustrative purposes, compared to Naveris' reported results for Q3 -- sorry, 2025 prior to the acquisition, specialty oncology volumes grew 35% compared to the prior year. Turning to Slide 15. Our revenue per test for testing services, including specialty oncology revenue, grew 9% year-over-year, driven by 22% year-over-year improvement in transplant revenue per test. Excluding out-of-period revenue, revenue per test of $1,377 grew 4% year-over-year, including the dilution from Specialty oncology this quarter. Excluding specialty oncology, transplant revenue per test of $1,514 grew 15% year-over-year. In the prior quarter, transplant represented 100% of our test volume mix. With the acquisition of our Specialty Oncology business, our mix in the third quarter was 80% transplant and 20% specialty oncology. Specialty oncology revenue per test of $823 was 6% higher than our prior forecast of $775 for this quarter. Turning to the next slide. Our non-GAAP gross margins for the third quarter were 74%, increasing from 71% in the prior year quarter and sequentially in line with our second quarter gross margins, driven by cost discipline, coupled with a 9% increase in revenue per test. The chart on the right illustrates a doubling of our adjusted EBITDA from $15 million in the prior year quarter to $30 million this quarter and a 23% sequential increase from the second quarter. Turning to guidance on Slide 17. We are increasing our 2026 full year revenue guidance by $30 million to $520 million to $530 million or $525 million and 38% year-over-year growth at the midpoint of the range and our full year adjusted EBITDA guidance by $23 million to $90 million to $100 million or $95 million at the midpoint of the range and 18% of revenue. Given there is 1 quarter left in 2026, on the right-hand side of Slide 17, we included the Q4 2026 implied model used to derive the midpoint of the 2026 guide. For those without the presentation in front of them, let me restate the key Q4 assumptions. Total revenue range of $131 million to $141 million or 25% year-over-year growth at the $136 million midpoint of the range. Testing services revenue of $112 million to $122 million or 50% year-over-year growth at the $117 million midpoint of the range, including $8 million in out-of-period revenue and $18.7 million in patient and digital revenue. Moving to test volumes, Q4 test volume of 76,000 to 80,000 tests or 47% year-over-year growth at the 78,000 midpoint of the range and test volume includes transplant volume range of 61,000 to 63,000 tests or 17% year-over-year growth at the 62,000 test midpoint of the range and 15,000 to 17,000 specialty oncology tests. Moving to revenue per test for testing services. Our Q4 2026 model assumes revenue per test, including the combined mix of transplant and specialty oncology of approximately $1,500, comprised of $1,400 of accrued revenue per test and approximately $100 in out-of-period revenue per test. For transplant, our model assumes revenue per test of approximately $1,680 comprised of $1,550 of accrued revenue per test and $130 of out-of-period revenue per test. For Specialty Oncology, our model assumes $825 of revenue per test and no out-of-period revenue. Our model also assumes 71% to 72% non-GAAP gross margins and non-GAAP operating expenses of approximately $79 million, including depreciation of $3 million, plus or minus $2 million. Our Q4 2026 implied adjusted EBITDA range is $16 million to $26 million or $21 million at the midpoint of the range, representing approximately 15% of revenue or 3x our prior year results. Slide 18 and 19 charts our prior and current full year 2026 guidance compared to our 2025 results. And with that, I'll turn the call back over to John.

John Hanna: Thank you, Keith. Our strategy is clear, and we are executing with discipline. This quarter, our transplant franchise delivered strong growth. We continue to scale specialty oncology, and we advanced our pipeline toward planned commercial launches in 2027. Across each market, that business progress translates into something much more meaningful, reaching and supporting more patients at important moments in their care. As our testing volume grows, so does the number of patients and families we have the opportunity to serve with precision molecular information that can help inform care decisions and provide greater clarity. I want to close by thanking the entire CareDx team. Your commitment to patients is what makes this progress possible. Every test represents a patient, a family and an opportunity to make a difference. I am grateful for the work you do every day to expand our impact. Thank you. And I would now like to ask the operator to open the line for questions.

Operator: [Operator Instructions] Your first question comes from the line of Kyle Mikson with Canaccord Genuity.

Kyle Mikson: Great quarter. I guess, John, on the payment LCD from August, can you just elaborate on how physician behavior has changed or could change as well as any change to testing frequency and patient penetration that you're seeing so far? And then how does that translate into the observable kind of volume revenue going forward like in '27, if you want to just comment on next year possibly?

John Hanna: We said all along that the LCD was a payment policy and really would not impact utilization in the field. And so as you've seen, we've continued to grow volume year-over-year quarter-over-quarter without any hiccup. I think if anything, as I've said previously, this is just an overhang that's been removed from the business, and we can get back to focusing on clinical differentiation and workflow optimization.

Kyle Mikson: All right. Perfect. And then for you or for Keith, on the NavDx ASP, so $823 in the quarter. I think the guidance was $770 or high 700s and then 4Q will be in that $820 range as well. So maybe just talk about further ASP sort of upside for NavDx next year? Or is this just a kind of a volume growth story going forward?

Keith Kennedy: We put it on our billing system on October 1, as John covered in his prepared remarks, and we're really excited about that. We think there's opportunity there. We do believe that we will be able to see price appreciation up to $1,000 or higher over time. And so the Medicare price for that test is $1,800. And so as we develop evidence and continue to increase adoption across the market, we'll see a lift on that. We hope to talk more about that when we do our Q4 call for next year.

Operator: Your next question comes from the line of Mark Massaro with BTIG.

Mark Massaro: This looks like the strongest volume quarter you've had in 4 years. And so what I'm trying to understand, you talked about protocol adoption and increase in kidney and lung. I would be curious about any changes in heart or maybe did kidney and lung just outperform heart -- but maybe at a higher level, the 21% growth in the quarter is really an inflection point higher. So would be curious if you could just expand a little bit more about the protocols. How many transplant centers are now on the protocols? How are you doing in for-cause? And has there been any lift in surveillance testing?

John Hanna: Yes, we had a really strong quarter. The team is firing on all cylinders in the field, both the sales and the medical affairs team in really building belief in the use of this testing, both in surveillance, which we have seen continued growth in the adoption of kidney surveillance protocols, lung surveillance protocols, heart surveillance protocols and in the use of the test in other context of care. And so this quarter, consistent with prior quarters, kidney continued to grow well over 20% year-over-year. Lung also had a very strong quarter and heart continues to grow in the mid-teens. And that has been consistent for us. And we think that, that's going to continue because the adoption of this testing is growing into a real standard of care in clinical practice for transplantation patients.

Keith Kennedy: And then I might add to that, Mark, that we have 17% year-over-year at the midpoint growth in volumes for testing, which we think is really strong. We had a great fourth quarter, as you'll remember last year. So the comp is really great. And then obviously, this quarter is an amazing quarter. So the sequential comp is also really great. But we feel very good about it.

Mark Massaro: Okay. That's really helpful. Is there a reason why lung is performing so strong? I recognize that it's relatively early days in terms of penetration. I think some investors misunderstood your market as mature, but it sounds to me like you're -- this is not very mature. And maybe could you speak a little bit about how much room there is left and maybe penetration rates by segment or at least in lung would be helpful.

John Hanna: Yes. I think you're right there, Mark. And we saw you noted that in the document. And I think you're spot on that we've got a lot of runway to go in all 3 segments. Lung, in particular, as you know, is a really complex organ, right, because you have environmental exposure as people breathe. And so there's a risk of infection and lung transplantation is -- I hate to say it, but like the least efficacious of the 3. The average survival of lung transplantation is only 5 years. And so they surveil these patients very closely to monitor for both immunological rejection and any environmental allergen that can cause the lung to go bad. And so we're actually seeing a higher test per patient in year 1 in lung than in any other organ where the test is adopted in the center. And so the ability to sell deep into lung transplant centers, coupled with our digital solutions, including our product, AlloHome, which is a remote patient monitoring solution for lung transplant patients that comes with a remote spirometry service that monitors the -- a force of breathing in the lung. And like once that starts to dip, it's a signal that, that patient is having a problem and needs to come in and be visited by the doctor. So that solution together has been really well received in the field by clinicians. And thus, we're seeing very strong growth in lung transplantation along with the fact that it's the most recent product to reach the market and has the lowest base of volume. And I think we expect that, that's going to grow faster than the other 2 organs for some time to come.

Keith Kennedy: And Mark, I guess I would -- we've talked historically about our mix and the analysts often ask us about the mix. And we've obviously seen very strong growth in lung and kidney and heart has just been a solid performer. Obviously, it's been around on the market a lot longer. Our mix currently is around 45% kidney, 45% heart and 10% lung as people think through the mix of the organs.

Mark Massaro: Okay. That is really helpful. And if I can sneak one more in. Keith, your billing and collections team is doing a fantastic job. You continue to drive outperformance there. Recognizing that you're guiding for $8 million in Q4 for prior period collections. I'm not asking for '27 guidance, but is it fair to say that there are some additional claims to pursue in 2027?

Keith Kennedy: Yes. We do anticipate that going forward, we will have out-of-period revenue. What we said historically is that we'd like to see where our accrual rates and everything merges so we end up around 2% of revenue is out of period quarterly. And so that's where I'm trying to land the aircraft. But this is just -- it's one of those kind of things. Our performance is going great. revenue cycle management is going great. This is a game where you're -- you just have to do 100 things every day, every test and the payers just don't want to pay. So you're always constantly rewarded if you do it well, and they'll use it against you if you don't. So we spent a lot of time making sure that we have the processes in place to make sure we have the right to win in all these cases. So we're -- we continue to work on it, and it's going well.

Operator: Your next question comes from the line of Tycho Peterson with Jefferies.

Unknown Analyst: This is [ Noah ] on for Tycho. Congrats on the quarter. To start, I just wanted to discuss EBITDA and the margins a little bit. It looks like you had quite a step-up in EBITDA margin even on a sequential basis, some leverage coming in on sales and marketing. So just wondering if there's anything in particular you could highlight that's driving that improvement there?

Keith Kennedy: Well, as you see, our OpEx has stayed at around $75 million from Q2 to Q3, and we had about $1.5 million of spend in Q3 related to the transaction. And sometimes they make us take things in operating expenses even though it's transaction related. We will likely have up to about $1 million, $1.5 million of that over the next 1.5 years, 2 years, but it will just -- it's declining at a rapid rate. But we feel like that expense control as we're -- as margins went up, our expense control that increase on the revenue cycle management is falling 100% down to investors. And as you'll see in our SEC filings, which may already be released is we had positive net income all 3 quarters this year, and we had positive net income in the third quarter of last year, and we're generating significant cash flow from operations. So we're obviously disciplined. We think of ourselves as owners of the business, and we're in here making sure we're being good stewards of your all's capital and our capital.

Unknown Analyst: Got it. And then maybe just one more on transplant ASPs. Obviously, quite a step-up on a year-over-year basis. I know true-ups are playing a part there. Curious how you're thinking about the longer-term runway? How much ASP appreciation is left in a maturity state? And what can you do in maybe the next couple of months, couple of quarters in the blocking and tackling to improve ASPs?

Keith Kennedy: And we will come out, obviously, in Q4 and give you thoughts around next year. But we do have internal -- we said we got here -- we had a 3-year target of $2,000 per test. We're at $1,550 in Q4, and we still have the team rolling on getting to $2,000 per test. And so we're really working on that. Again, let me differentiate that when I say that, that is for solid organ transplant. And on Naveris', we thought that originally coming out of the gate was going to be like $775 a test. We came in the low 800s. And we thought it was really important to put that on our billing system and leverage the workflows that we have in place that we have the right to win there. So we do think that's an upward positive story and tailwind. We just not prepared to [indiscernible] at this point.

Operator: Your next question comes from the line of Bill Bonello with Craig-Hallum.

William Bonello: I just wanted to circle back on the transplant volume. It just seems to me like measuring against a target protocol is maybe no longer the best way to think about where volume could go. I mean I would imagine your team is more out promoting the expansion of use cases across the entire continuum than trying to get people to necessarily say, hey, we'll get as many people as possible to test 6 a year. Is that kind of fair? And is there as much for-cause opportunity because of the expanded testing reasons as there is surveillance opportunity?

John Hanna: I think that it's both, right? There are centers today in the United States that don't use molecular testing at all, surprisingly. And there are centers today that use it only in the for-cause setting and have no surveillance program. And we continue to try to build belief at those centers that this should be a part of their standard of care for transplantation patients. Certainly, I believe that the for-cause indication is large. we have talked about expanding that context of use, including looking at therapeutic efficacy in the setting of rejection, transitioning patients from dual therapy to monotherapy in the setting of immune suppression, the weaning of immune suppression and then also supporting the management of patients that have delayed graft functions and trying to reduce biopsies in that setting. So there's a lot of use cases for-cause, but not every patient has rejection, right? There are a lot of patients that get a nice living donor organ and are at low risk for immunological rejection. So certainly, it's a large opportunity to continue to pursue it and we continue each of these use cases. And we think that this gives us a lot of runway in each of our clinical indications in transplantation to continue to grow.

William Bonello: Okay. That's very helpful. And then just on AlloHeme, can you just tell us sort of the plan for pursuing coverage there and what some of the critical milestones we should be looking at or waiting for?

John Hanna: Absolutely. And thanks for the questions, Bill. First and foremost is publication of the clinical validation study, the ACROBAT trial. And as I shared in my prepared remarks, the steering committee, the PIs around the country that led that trial have drafted a manuscript and submitted that for peer-reviewed publication. So that's number one. And number two, as you know, the submission of your tech assessment data for coverage largely parallels the data that you need to generate for New York State Department of Health approval, like all of the guard band studies,, the analytical verification studies, the reproducibility studies. And so we continue to be on track to complete that CLIA readiness work in 2026, such that we are prepared in 2027 to submit that analytical verification data along with the clinical validation data for coverage. And when we had our investor call in February, we said that we would anticipate that coverage materializing likely in '28 and that the product delivering significant revenues in 2029.

Operator: Your next question comes from the line of Mason Carrico with Stephens Inc.

Mason Carrico: I will just ask my 2 upfront here. So on AlloHeme, recognizing it's early, I guess, how are you guys thinking about the volume ramp after you launch? Do you plan on gating volumes at all ahead of Medicare coverage? And then I guess as my follow-up there, on the workflow, will AlloHeme be orderable through Epic Aura at launch at centers where that's already live? Or does that integration come later?

John Hanna: I don't think we're going to gate volume because for me, I believe this product will be a standard of care and is going to significantly change the way AML and MDS patients are monitored. And so this market in a concerted way, focusing on the top-tier KOL centers first and being fully integrated and getting the test adopted on protocol there. And that's what we're going to focus on next year with a limited team doing that, Mason. We're not going to hire 100 people to do this. We'll have a limited team in the field focused and targeted on those top stem cell transplant centers, bone marrow centers. And then as it relates to Epic, I love this question because this will be a product that we launched native on Epic Aura. So 100% of the ordering should go through EMR integration on day 1. And I am very excited to see what that ramp looks like because this is the first test that I'm aware of that I've ever launched that will be native on that platform. And so we're very excited about that.

Operator: Your next question comes from the line of Matt Larew with William Blair.

Matthew Larew: I'm sort of going to piggyback on that one. And John, you alluded to a focused team around AlloHeme at launch. But in your initial prepared remarks, you described both HistoMap and AlloHeme sort of starting to build support activities and commercial infrastructure throughout 2027. Could you just describe a little bit more what that will look like and how much you can sort of leverage from the existing team versus people and other related resources that you're going to be layering on throughout the year?

John Hanna: HistoMap is a product that extends our solution for kidney transplant -- and so HistoMap is utilized on a tissue biopsy, presumably in a patient that has an elevated AlloSure score and then goes on for a biopsy procedure. And so our field team that markets and sells and does medical education around AlloSure Kidney today will be the same team that promotes HistomMap kidney. So no added resource there, really just adding another product to the bag to complete and round off our solution in kidney transplant management. That product, as I've said before, addresses not a huge market. I would say, somewhere in the range of 2,500 to 5,000 kidney biopsies a year, and we will likely target a Medicare reimbursement for that product somewhere in the ballpark of $3,000 a test, which is consistent with other tissue-based gene expression molecular tests that are on market today. In the AlloHeme setting, as I shared, that's really a new call point for us. This is for bone marrow transplant centers that are patients that have AML and MDS that are managed by a HemOnc. And we will have a very targeted team focused on that to begin with to start the journey of introduction of AlloHeme into the top centers that really drive standard of care influence among other clinicians and guideline adoption.

Matthew Larew: Okay. The second is on Naveris'. Again, you highlighted upfront some of the evidence that you started to generate there. As you think about expanding into other context of use, again, you talked through some of the Phase II studies today. What's 2027 going to look like in terms of further evidence generation? And what's maybe the time line or key sort of flags in the ground as you work towards coverage and commercial launch?

John Hanna: Right. So NavDx is commercially available. It's being utilized broadly in the head and neck cancer space. And there are a large number of ongoing clinical studies that we are supporting across the country to continue to generate the evidence to demonstrate the utility of NavDx both in the surveillance setting and then in other context of use like treatment decision-making such as radiation deescalation, as I outlined in my prepared remarks. I think that this indication of radiation deescalation is really interesting because it's a really difficult clinical decision to make. The morbidity of radiation is significant for patients. I had one clinician at the ASTRO meeting that I attended tell me that the radiation deescalation study that he is running at his center is the #1 accruing trial in the entire medical center across every indication that, that oncology center treats because patients want less radiation. It is significantly affecting their daily life. And so while it's not a lot of testing, you would only test each patient once, the way I think about this is that if you're using NavDx early in the care journey [Technical Difficulty] you're [Technical Difficulty] that patient with NavDx throughout their care journey in surveillance post definitive treatment. And so it's a catalyst for us to drive more surveillance utilization and more test per patient with NavDx. Now both of these trials were Phase II trials. And so they're not definitive Phase III [ CTs ]. But I think the interest in this particular context of use so high in the clinical community that we will likely start to see in 2027 more clinicians utilizing NavDx to determine the extent of radiation in their patients.

Operator: [Operator Instructions] Your next question comes from the line of Yi Chen with H.C. Wainwright.

Unknown Analyst: This is [ Katie ] on for Yi. A quick one for you guys. Could you go through bridging the revenue guidance increase between transplant volume, current period reimbursement and the NavDx and kind of the prior period collections trying to figure out for 2027 modeling, what current revenue per test assumptions we should carry forward and how we should think about the remaining pool.

John Hanna: We're not providing 2027 guidance today, but what I would point you to is previously in -- when we provided a 3-year long-range plan, we said that we would grow our solid organ transplant business by 15% year-over-year. And so I think using that as the basis for '27. And then in NavDx, we said at the time of the acquisition that we would grow that business 30% to 40% for the next 2 years, so through 2027 as well. And I think for your modeling purposes, you can just use the Q4 ASP guidance for each product and hold that steady through 2027.

Operator: Your next question comes from the line of Kyle Mikson with Canaccord Genuity.

Kyle Mikson: Just had a quick follow-up. Just one question. As these like frontier labs and pharma kind of need more data to train these AI models, thinking about expanding outside oncology, just given your guys' role in transplant and then maybe partnerships like with 10x for the ImmuneScape, how could CareDx sort of have a role in that over time? And what could that do for sort of the company outside of just traditional testing?

John Hanna: We certainly have an extensive database in solid organ transplant, including molecular information on the tests that we performed. We have data on utilization from the EMR and software tools that we provide to our customers. And we have established a platform that we call [ VANTx ] that today allows our medical team to support clinicians in the field in understanding utilization trends and running models on that data to predict what's going to happen with both cohorts and individual patients that those clinicians manage. And we continue to invest in that data platform, and we have a series of models within that platform that are both lock statistical models and then open learning models that we make accessible to those clinicians. We're starting today to really chart our strategy in specialty oncology on how we're going to utilize the data we're generating from HPV-driven cancers on -- in a similar way and in a platform similar to VANTx or in the same platform. And so I'd ask just hold that question for some time in early '27, and we'll come back to you on that one.

Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.