Earnings call transcript: CareDx Q3 2025 revenue beats forecast, stock dips

CareDx Inc. (CDNA) reported its third-quarter 2025 earnings, revealing a significant revenue beat with $100.1 million compared to the forecasted $95.32 million. Despite this, the company's stock price fell by 1.69% in aftermarket trading, closing at $14.77. The earnings per share (EPS) stood at $0.28, a substantial improvement over the expected -$0.08, marking a 450% surprise. However, the stock's dip suggests investors may be cautious about other factors influencing the company's future outlook.

Key Takeaways

• CareDx reported a 21% year-over-year increase in total revenue.
• Testing services revenue rose by 19% YoY, reaching $72.2 million.
• Adjusted EBITDA more than doubled year-over-year to $15.3 million.
• Gross profit margin improved by 190 basis points to 70.9%.
• The company raised its 2025 revenue guidance to $372-$376 million.

Company Performance

CareDx demonstrated robust performance in Q3 2025, with a 21% increase in total revenue year-over-year. The company continues to lead in the transplant diagnostics sector, offering an integrated approach that combines diagnostics and digital solutions. Despite slower-than-expected growth in kidney transplant volumes, CareDx maintains a strong competitive position as the only company serving transplant patients end-to-end.

Financial Highlights

• Revenue: $100.1 million, up 21% YoY.
• Testing services revenue: $72.2 million, up 19% YoY.
• Patient and digital solutions revenue: $15.4 million, up 30% YoY.
• Lab products revenue: $12.5 million, up 22% YoY.
• Adjusted EBITDA: $15.3 million, more than doubled YoY.
• Gross profit margin: 70.9%, up 190 basis points.

Earnings vs. Forecast

CareDx's EPS of $0.28 significantly surpassed the forecasted -$0.08, resulting in a 450% earnings surprise. This marks a substantial improvement over previous quarters, indicating effective cost management and revenue growth strategies.

Market Reaction

Despite the positive earnings surprise, CareDx's stock price fell by 1.69% in aftermarket trading, closing at $14.77. This decline could reflect investor concerns over slower-than-expected growth in kidney transplant volumes and potential impacts of reimbursement policy changes. The stock remains within its 52-week range, between $10.96 and $26.37.

Outlook & Guidance

CareDx raised its 2025 revenue guidance to a range of $372-$376 million, reflecting confidence in its strategic initiatives and market position. The company also increased its adjusted EBITDA guidance to $35-$39 million. For Q4 2025, CareDx anticipates testing volumes between 52,000 and 54,000 tests, with expected revenue per test ranging from $1,400 to $1,420.

Executive Commentary

"Our mission is clear: to create life-changing solutions that enable transplant patients to thrive," stated John Hanna, CEO of CareDx. He emphasized the company's unique position as the only provider serving transplant patients end-to-end, attributing growth to strategies aligned with this mission. Hanna also highlighted the importance of recent product launches and operational improvements.

Risks and Challenges

• Slower growth in kidney transplant volumes could impact revenue.
• Changes in reimbursement policies, particularly regarding Medicare, may affect financial performance.
• The company faces competition from emerging technologies in transplant diagnostics.
• Macroeconomic factors, such as inflation and supply chain disruptions, could pose challenges.

Q&A

During the earnings call, analysts inquired about the potential impacts of the LCD policy on Medicare reimbursement, which could influence future revenue streams. The company also addressed questions regarding the slower-than-expected impact of the IOTA program on kidney transplants, highlighting ongoing efforts to enhance market penetration.

Full transcript - Caredx Inc (CDNA) Q3 2025:

Regina, Conference Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I'd like to welcome everyone to the CareDx third quarter 2025 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. To withdraw your question, press star one again. I'd now like to turn the conference over to Tina Jacobson, Vice President of Investor Relations. Please go ahead.

Tina Jacobson, Vice President of Investor Relations, CareDx: Thank you, Operator. Good afternoon. Thank you for joining us today. Earlier today, CareDx released financial results for the third quarter 2025, ending September 30th, 2025. The result is currently available on the company's website at www.CareDx.com. Joining me on today's call are John Hanna, President and Chief Executive Officer, and Nathan Smith, 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 could 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 are included in our filings with the Securities and Exchange Commission. The information provided in this conference call speaks only to the live broadcast today, November 4th, 2025. We disclaim any intention or obligation accepted 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, which is posted to our website. I will now turn the call over to John.

John Hanna, President and Chief Executive Officer, CareDx: Thank you, Tina, and welcome to everyone joining today's call. We had a strong third quarter on many fronts, including record volume and record revenue in testing services, patient and digital solutions, and our lab products businesses. Our strategy of solution selling is working. At CareDx, our mission is clear: to create life-changing solutions that enable transplant patients to thrive. We are uniquely positioned as the only company serving transplant patients from end to end, delivering innovative diagnostics, digital tools, and patient support that span the entire transplant journey. Our strategy is rooted in putting patients and their care teams at the center of everything we do, and you'll see this reflected in our product innovations, operational excellence, and the way we partner with transplant centers worldwide. At the core of this strategy lies an exceptional team, the true driving force behind our success.

To further strengthen the outstanding group here at CareDx and advance our mission, I was delighted to announce in October the appointment of Suresh Gunasekaran, President and CEO of UCSF Health, to our Board of Directors. With over two decades of experience leading major academic medical centers, including some of the largest solid organ and bone marrow transplant programs in the United States, Suresh brings to the organization the voice of our customers, offering invaluable perspectives as we advance our strategy to become the solutions provider to transplant centers. In addition, I was also pleased to welcome last month Dr. Jeffrey Teuteberg, our new Chief Medical Officer. Jeff is one of the most forward-thinking clinicians in transplantation.

He is internationally recognized for his track record of clinical innovation, research, and patient advocacy, and is joining us from Stanford University, where he was Section Chief of Heart Failure, Cardiac Transplant, and Mechanical Circulatory Support since 2017. Jeff has held prominent roles in the American Society of Transplantation and as the President of ISHLT, or the International Society for Heart and Lung Transplantation. His deep experience will be instrumental as we strive to establish non-invasive molecular testing as the standard of care in solid organ transplantation and launch our next generation of precision medicine assays in stem cell transplant. The expertise and vision of these leaders reinforce our commitment to innovation in both new products and how we go to market and engage our customers. Now, onto the third quarter results. Total revenue of $100.1 million grew 21% year over year.

Adjusted EBITDA was $15.3 million, more than double Q3 last year. We repurchased an additional two million shares during the quarter at an average price of $12.87. Year to date, we have repurchased approximately 9% of shares outstanding. Today, we are raising 2025 revenue guidance to $372-$376 million, a reflection of our strong performance in the third quarter. We are also raising adjusted EBITDA guidance to $35-$39 million. Nathan will provide additional details on the guide in his prepared remarks. In testing services, revenue was $72.2 million for the third quarter, an increase of 19% year over year. We delivered approximately 50,300 tests in the third quarter, up 13% year over year, with growth across all three organs: heart, kidney, and lung. I personally visited 20 transplant centers in the third quarter.

I spoke with the clinicians and transplant program administrators to understand how our existing and future solutions can help improve the care of their patients. Their feedback was clear. Our team is highly engaged, consistently puts patients first, and is executing on the right priorities. I also spent time with our local commercial teams, gaining valuable insights into where our solution selling strategy is working and where we can further improve. These conversations reinforced my confidence in our strategy and our people and left me inspired and optimistic about the significant growth opportunities ahead. This week at the American Society of Nephrology meeting, or ASN, we are launching HistoMap Kidney, a breakthrough tissue-based molecular test that exemplifies our commitment to end-to-end transplant care. By integrating advanced histopathology with molecular insights, we're empowering clinicians to make more precise and timely decisions for their patients.

This is just one example of how CareDx is bridging the gap between diagnostics and patient outcomes, reinforcing our leadership in delivering comprehensive solutions across the transplant continuum. HistoMap Kidney is built on the BANFF Human Organ Transplant Gene Set, a research tool adopted by transplant researchers globally and leverages gene expression profiling for deeper insights into immune activity and rejection phenotypes to inform clinical decision-making. We built HistoMap Kidney to address a critical unmet need in transplant care. If a patient's kidney function declines after transplant, clinicians need clarity on the type of rejection. With HistoMap Kidney, doctors can use the original biopsy tissue to obtain a precise molecular readout, confirming the subtyping rejection from an FFPE sample. By providing objective, actionable data, HistoMap Kidney helps reduce uncertainty in biopsy interpretation, gives clinicians and patients greater confidence in their diagnosis and next steps.

It will be available starting in early 2026 in a clinical study and then for commercial use later in the year. Also, at ASN Kidney Week, CareDx Technologies will be showcased in five abstracts covering AlloSure and our AI-derived integrated risk assessment algorithm, AlloSure Plus. The abstracts will present new insights, including biomarker interpretation in the early post-transplant period. Including in the setting of delayed graft function and new evidence supporting the use of AlloSure in combination with clinical data to predict antibody-mediated rejection. Further, AlloSure Kidney will be featured in new analyses from the CAOR registry, demonstrating its ability to predict long-term outcomes and in research demonstrating the use of AlloSure Kidney to facilitate the transition to immune suppression monotherapy in kidney transplant patients. Belatacept monotherapy is preferred by clinicians because of its demonstrated improved clinical efficacy and tolerability as compared to traditional regimens.

This emerging evidence suggests AlloSure can be utilized to optimize immune suppression strategies and improve long-term outcomes for transplant recipients. In addition, an ASN abstract from Henry Ford Hospital in Detroit addresses whether donor kidney volume impacts AlloSure levels or one-year graft function. This is particularly relevant in pediatric transplantation, where size mismatch between donor and recipient has been a concern. The study found that kidney size did not significantly affect AlloSure levels or graft function at one year, reinforcing the reliability of our non-invasive monitoring tools across a broad range of donor and recipient characteristics. These new data reflect our commitment to advanced transplant care through rigorous science and innovation. We are proud to see our technologies validated across diverse clinical settings and patient populations and look forward to continuing to deliver meaningful solutions that improve transplant outcomes.

Keeping with our commitment to evidence generation, I want to highlight a major milestone in heart transplantation. Just two weeks ago, the second study from the SHORE Registry was published in the Journal of the American College of Cardiology: Heart Failure. This is the largest prospective analysis of antibody-mediated rejection, or AMR, in heart transplantation ever published. The SHORE study evaluated over 2,200 heart transplant patients across 59 U.S. centers, analyzing nearly 25,000 biopsies and almost 9,000 paired AlloSure Heart samples. This is truly a landmark data set. What's most exciting is that SHORE validates HeartCare, which brings together AlloMap and AlloSure Heart as a non-invasive, clinically proven approach to heart transplant surveillance and context-driven decision-making. The data show that AlloSure Heart results are highly specific for diagnosing AMR.

Elevated AlloSure Heart levels were strongly associated with biopsy-proven AMR, and higher values correlated with more severe rejection, and when AlloSure is modestly elevated, a positive AlloMap can help identify those at risk for acute cellular rejection. These findings demonstrate that HeartCare can optimize biopsy utilization and clinical decision-making in heart transplant care. Lastly, on the topic of evidence generation, I'm particularly proud of our leadership in response to the draft LCD policy for molecular testing for solid organ allograft rejection that was published in July. Our team delivered a comprehensive, evidence-based comment letter that champions patient access to personalized care. We submitted the letter to policymakers ahead of the public comment period close on August 31st, and it remains accessible at CareDx.com/LCD-comment-letter. We consider the draft policy to be a significant step forward in affirming coverage for surveillance testing without a tie to protocol biopsy.

However, we noted that limits placed on surveillance testing conflict with clinical guidelines and restrict clinician decision-making in scenarios where patients have elevated risk of rejection. Specialty societies, key opinion leaders, advocacy groups, policymakers, and patient stakeholders also submitted comment letters emphasizing concerns with the proposed limits. We urged policymakers to maintain coverage for combination molecular tests such as AlloMap Heart and AlloSure Heart. Our comments provided the latest evidence and clinical data, which demonstrates that testing with AlloMap Heart and AlloSure Heart identifies rejection with greater accuracy than gene expression testing or donor-derived cell-free DNA testing alone, resulting in improved patient outcomes. We continue to anticipate that the draft policy will be finalized in early 2026. On our earnings call last quarter, we commented on the likelihood of potential outcomes and the associated financial impacts, and those expectations are unchanged today.

We plan to provide an update on our long-range planned financial assumptions once the policy has been finalized. We remain committed to supporting the transplant community and have not and do not anticipate to observe any business impact as the draft policy comments are being evaluated and the policy is being finalized. Moving on to our initiatives to drive operational excellence, placing our customer at the center of everything we do has driven us to improve our enterprise infrastructure and business processes to operate more efficiently. We continue to push forward with the launch of our Epic instance to make it easier for healthcare providers to order CareDx testing and receive test results. We have eight Epic Aura Transplant Center connection projects in process now and are officially live at Boston Children's, the U.S.'s leading pediatric heart transplant program. Feedback from that pilot implementation has been exceptional.

Because our Epic order set is tailored to transplant centers, it makes the center's workflow simple and fast. Since going live at Boston Children's, AlloSure Plus results are now available directly through Epic Aura. Medical records are received automatically with each order, and the center has seen a 20% reduction in order turnaround time and a 60% reduction in specimen holds. This is a great example of how we're making the clinician and patient experience better, not just faster. We continue to expect roughly 10% of our total volume will be serviced through Epic Aura integrations by year-end, and roughly 50% of total volume will be serviced through Epic Aura integrations by year-end 2026. This quarter, we also made remarkable progress on revenue cycle management.

Building on last year's foundational updates to the team and workflows, we've now begun automating key RCM processes with AI, streamlining claim submission, accelerating appeals, and reducing manual intervention across the board. The investments are already delivering measurable results. This isn't just operational fine-tuning. This is a strategic move to unlock operational efficiency to drive margin expansion and support scalable growth as our testing volumes increase. In the third quarter, we achieved improvements across all of our RCM KPIs compared to our benchmark periods, including an over 200% improvement in total appeals volume, a 60% improvement in claim submission time, a 600 basis point improvement in overall zero pays, and a 1,300 basis point reduction in claims rejection rate. We believe these wins are key leading indicators for the growth and predictability of average revenue per test and are beginning to emerge in our financial statements.

Cash collections in the third quarter were exceptional, with collections accelerating to 124% of testing services revenue. Nathan will provide additional color on our expectations for revenue per test in his prepared remarks. I'll now turn to patient and digital solutions, which includes our transplant pharmacy, software tools, and remote patient monitoring services. In the third quarter, we reported revenue of approximately $15.4 million, representing 30% growth compared to last year. Our solution selling strategy is driving strong results. By delivering integrated patient and digital solutions, we're unlocking new growth opportunities for testing services, deepening customer loyalty, and strengthening our brand equity.

For example, at the largest kidney program and pediatric institute in Georgia, we have become the pharmacy of choice for the kidney transplant program to help more efficiently and effectively manage their post-transplant patients as they ramped up their kidney transplant volume and initiated an AlloSure kidney surveillance protocol. Next, in lab products, which includes PCR kits for rapid deceased donor HLA typing, NGS kits for transplant recipient HLA typing globally, and IVD monitoring assays for solid organ and stem cell transplant recipients outside the U.S., revenue of $12.5 million was up 22% year over year. We just returned from ASHI, the American Society of Histocompatibility and Immunogenetics' annual conference, where we showcased CareDx's continued investment in creating life-changing solutions. This year at ASHI, we launched AlloSeq Tx11, our next-generation HLA typing solution with enhanced Class II coverage and expanded non-HLA markers to support broader transplant organ profiling.

AlloSeq Tx11 is designed for flexibility, working with low-quality samples, preventing allele dropouts, and reducing the need for retesting. We also introduced SCORE7, our modernized analysis software for QType, built for scalability and regulatory alignment and supporting future ABO typing and IVDR compliance. In addition, we announced that AlloSeq Tx and QType have received IVDR certification in the European Union, underscoring our commitment to delivering high-quality regulatory compliance solutions for transplant centers worldwide. Our well-attended user group meeting entitled "ABO Histocompatibility in Transplantation: Current Status, Unmet Needs, and Future Directions" featured leading experts from the Brigham and Women's Hospital, LifeLink Foundation, and the University of Alberta. The session addressed the clinical relevance of ABO antibodies in transplant rejection, genotype versus phenotype discrepancies, and the importance of advancing ABO blood typing for improved patient outcomes.

Additionally, we announced our validation of a rapid ABO genotyping assay, which demonstrated 100% concordance with established methods and enables faster, more accurate blood group determination. By integrating ABO and HLA genotyping into a single workflow, we're helping transplant centers expand donor eligibility and streamline organ allocation, delivering real-world impact for patients and providers. This is the degree of innovation that defines CareDx and supports our confidence in continued strong lab products growth. Before I hand it over to Nathan, I want to reflect on our recent progress. Each achievement this quarter is a direct result of our strategy in action and underscores the importance of keeping patient needs at the center of every decision. Our progress isn't just measured in numbers, but in real-world impact we're having on transplant patients, their families, and the clinicians who care for them.

The growth we're seeing is not just the result of isolated initiatives, but of a cohesive approach where each decision and investment is anchored in delivering meaningful value for patients and their care teams. These growth drivers clearly demonstrate how our investments in innovation, optimizing our go-to-market approach, building and amplifying evidence generation, and enhancing operational excellence through RCM progress and Epic Aura integration are translating into meaningful impacts for patients, providers, and the broader transplant community. They serve as proof points that our strategy is working and that we are building lasting value for all stakeholders, including our shareholders. Our leadership team has a proven track record of disciplined capital allocation and operational execution. We are confident that these strategic investments will yield a strong return, fueling high-quality, durable growth for years to come.

There is no shortage of work left to be done, but I'm proud of our execution so far this year and anticipate continued progress. Now, I will turn the call over to Nathan to discuss our detailed financial results and guidance. This is Nathan's first call as our CFO at CareDx. I'm thrilled to have him on the team and look forward to his leadership as we execute on our strategic and financial goals. Nathan? Thank you, John. And good afternoon, everyone. It's an honor to be here, and I'm grateful for the opportunity to contribute to the value creation that's ahead for CareDx. Starting with financial highlights and key performance indicators for the third quarter compared to the prior year quarter, total revenue of $100.1 million increased 21%, with all three business segments generating record quarterly revenue.

Testing services revenue of $72.2 million increased 19% on reported test volume of approximately 50,300, an increase of 13%. Revenue per test of $1,436 increased 5%. Revenue per test includes $5.9 million in revenue recognized from cash collections in excess of receivables on historical claims. This positive benefit was driven by the success of our revenue cycle management function that improved our cash collections on those historical claims. We will be using the revenue per test metric that minimizes the back and forth of adjustments and better reflects the fundamentals of our business. Continuing on, patient and digital solutions revenue of $15.4 million increased 30% due to further adoption of the CareDx Pharmacy as the pharmacy of choice for transplant patients. Lab product revenue of $12.5 million increased 22%, driven by our distributed NGS transplant test kits and our PCR-based rapid HLA typing kits.

Gross profit of $70.9 million reached a high watermark, increasing 190 basis points to 70.9%. This improvement was driven principally by top-line performance and input cost discipline. Our non-GAAP operating expenses of $57.9 million declined to 58% of revenue, down from 63% of revenue. Adjusted EBITDA of $15.3 million increased significantly, driven by revenue growth and operating leverage. Now, turning to cash, we collected $119 million this quarter. Our RCM team achieved record collections of approximately $90 million from testing services. Those record collections drove $19 million in sequential reduction in our accounts receivable and a significant 38% improvement in DSOs, which improved from 71 to 44 days. That performance underscores the transformative impact of our investments to accelerate claim collection in RCM. We closed the third quarter with $194.2 million in cash and cash equivalents, following a $25.6 million share repurchase during the period.

We exited the quarter with 51.4 million shares outstanding and no debt. I'll turn next to guidance. With the strong performance in the third quarter, we now expect full-year 2025 revenue of $372-$376 million. We also expect full-year non-GAAP gross margins to be approximately 70%. Turning to Adjusted EBITDA, we are raising full-year guidance range to $35-$39 million compared to the previous range of $29-$33 million to reflect the strong operating results in the third quarter. Updated full-year guidance implies fourth-quarter revenue of $101-$105 million. That assumes full quarter testing volume will range between 52,000-54,000 tests. The strong momentum of RCM wins and cash collections are driving greater predictability and increasing our confidence in continued average revenue per test improvement. In October, we had the highest cash collections for testing services in the company's history.

In Q4 2025, we expect to recognize revenue per test of $1,400-$1,420, inclusive of $4-$6 million of collections in excess of receivables. We are taking a prudent approach to guidance on this metric to allow for potential variations in payer mix, coverage, and contracts. Now, turning to the other revenue lines, we expect patient and digital revenue of $15-$16 million and lab products revenue of $12-$12.5 million. We expect fourth-quarter non-GAAP gross margins of approximately 70%. And finally, we anticipate fourth-quarter Adjusted EBITDA to range between $10-$14 million. To conclude my remarks, the momentum of the business at CareDx is robust. We are delivering a unique combination of top-line expansion, margin improvement, and OpEx management. Results in Q3 are a testament to the execution and our ability to scale efficiently while controlling costs. I'll now turn the time back over to John. Thanks, Nathan.

In closing, everything we've discussed today, from our strategic execution to our operational progress, reflects our unwavering commitment to putting patients first as the only transplant company offering end-to-end care. The growth we're delivering is a direct result of strategy shaped by that North Star, and the impact is evident in the lives we touch, the partnerships we build, and the innovations we bring to the transplant community. We remain focused on advancing the standard of care, deepening our relationships with clinicians and centers, and driving sustainable value for all our stakeholders. With the right strategy, the right team, and a clear sense of purpose, we are well-positioned to lead the field and realize the full potential of CareDx. And with that, I'd like to open the call for questions. We will now begin the question-and-answer session.

In order to ask a question, simply press star followed by the number one on your telephone keypad. Our first question will come from the line of Andrew Brackman with William Blair. Please go ahead. Hi, everyone. This is Maggie Bowie on for Andrew. Thanks for taking our questions. You highlighted some of the wins on the revenue cycle management side of things and then some of the impact that has already shown up here, both for the third and fourth quarter thus far. How should we be thinking about the durability of those impacts on ASPs moving forward? And then as you sort of think about additional products which might exist, how do we think about the runway for further ASP lift from revenue cycle management initiatives moving forward? Yeah, I'll take the first part of that and the durability of ASPs.

Yes, as I mentioned in my prepared remarks, third quarter was a record quarter for us in terms of cash collections, and we saw that same momentum going into fourth quarter in October. Just over the last six months, we have seen an overall increase in our base revenue per test increased by 5%. So what gives me confidence in the durability of that ASP is the strong cash collections on the historical claims that will ultimately increase that base ASP that we'll be recognizing on future claims. Now, these RCM victories increase the predictability of our revenues per test over time, and we see that momentum continuing through the fourth quarter and into 2026. Great. Thanks for that. And then maybe just one on the Epic Aura integrations. Appreciate the comments so far on how it's been trending with your first pilot in Boston.

But just how do we think about the rollout of the integration for the other accounts you have planned, both for 2025 and 2026? We've seen a lot of labs thus far have the major tailwinds from these integrations. So can you talk about what you're expecting there? Thanks. Yeah. Thanks for the question, Maggie. I'm going to ask Keith to field that one. Thanks, Maggie. Yeah, we have about 150 active discussions going on with hospital and transplant centers across the country right now. And we anticipate going live with about 40 centers in 2026. We agree there's typically a 10% uplift in volume once you go live, and we are tracking three major KPIs on each integration as we go. And we expect to sort of report and show that next year as we do these.

But right now, we don't have enough implementations to give you real-world evidence as to what that uplift is. But we were really. Excited to see that we had a 20% reduction in order turnaround time, which is really important to the centers. We're the leading transplant solid organ testing company in the United States and really globally with the fastest turnaround time. So I was glad to see that we could further improve that. And then we had a 60% reduction in specimen holds, which contributes to the turnaround time and the improvement in that. So all really, really good things for our relationships and what we think it'll impact volumes going forward. Great. Thanks so much. Our next question will come from the line of Mark Massaro with BTIG. Please go ahead. Hey, guys. This is Vivian on for Mark.

Thanks for taking the questions and congrats on the nice quarter here. I just had a quick one. Were there any prior period collections in the quarter? Apologies if I missed it. Yes. And Vivian, thanks for joining us today. Yes, there were. As I mentioned in my prepared remarks, we had approximately $5.9 million in cash collections that exceeded our historical claims. There was a positive benefit. Okay. Understood. And then just want to follow up on the ASP. I heard you on the Q4 ASP guide. Just should we be thinking about that kind of $1,400 level as a new floor moving forward? And just in terms of the remaining upside on ASP. What's the new framework we should be using to think about it? I think your denial rate is at about 40% right now. So just where do you think this can go at peak? Thanks.

Yeah. Again, thank you, Vivian. Great questions there. So as I mentioned previously, the range that we guided to for fourth quarter is between $1,400 and $1,420 for our ASP, which you should be using in your models. Then as we think about the framework to be using, as we described, we're looking at this framework as a revenue per test. And so we're taking total revenue divided by total reported test. And that's the way we're looking at it because it removes the variability that we see in these out-of-period adjustments. Okay. Understood. Thanks for taking the questions. Our next question comes from the line of William Bonello with Craig-Hallum. Please go ahead. Hey, a couple of questions. Thanks. I'm just going to take another crack at that because I just want to make sure. So I think what you're saying is.

What we calculate as the ASP or the revenue per test is the revenue per test going forward. That's how we should think about it. But then. You use the language of. Cash collections exceeding historical claims. Historically, I think you talked about. Prior period collections sort of beyond what you would normally expect. I'm just trying to understand if what you're calling out is consistent with what you've called out in the past, or if you're looking at that call out in a slightly different way. And if you're sort of saying, "Look, going forward, we're not going to be giving that call out." I apologize. I'm just a little confused by it. Yeah. Thanks, Bill. Hey, it's John. Appreciate the question and the clarity. We're certainly going to call it out because we're going to be transparent. You can see it on the books.

So we did have the $5.9 million in prior period revenue that we collected. But as you know, when the RCM function really starts cranking like we've got it going, we're going to collect this cash, which we view to be indicative of future period ASP. And so this quarter, we had cash collection that was 124% of our revenue that we booked in the quarter. And as those claims age into the accrual window, we're going to continue to see that ASP propped up. So we're pointing toward revenue per test as the metric to look at because it's more indicative of what you're going to see in future quarters from the company. Yeah. Okay. I think that makes sense. And I mean, there's always prior period adjustments, good guys and bad guys, right?

So okay, so nothing unusual is the bottom line about the $5.9 million in this period. That's correct. Okay. That's helpful. And then just a different topic. I'm just curious, John, or anybody, if you have any sort of on the macro environment, if you have any thoughts on the overall trends we're seeing in transplant volume. Obviously, your volume growth is staying pretty strong, but the overall transplant volume seems to have really been low for a while now. And I know we don't see an immediate correlation to your volumes, but you would think at some point, if we don't see a recovery in transplant volume, that might influence the overall testing volume. So just curious if you have thoughts on what's going on with the overall transplant demand or volume, and then just how you think about that in terms of your growth going forward. Thanks, Bill.

I appreciate the question. I'll first address our volumes, and then I'll talk about the macro. So as you know, this market is really just at the early innings of penetration. So we anticipate that our growth rates will continue to outpace the growth of the market overall for the foreseeable future. And when we think that that's not the case, we'll update you. But for right now, for as far as I can see, that's going to continue to be the scenario. In general, in the macro environment, we've seen transplant volumes across all three solid organs remain relatively flat year over year, maybe like 1% up or down, depending on the organ. We had anticipated that we would see some acceleration here in the back half of the year, particularly in kidney transplant volumes that has not yet materialized.

And we speculate that some of that is a function of the media. That has been attracted to this space and questioning the practices of some of the various entities that participate in the transplant market. And that has dampened the acceleration in kidney transplant volume that we would have expected from the IOTA program. Now, remember, that program is a six-year program. And so we've got a lot of runway to go on the impact of that policy, given that we're only one quarter into a six-year program. So I still have confidence that we're going to see growth in the kidney transplant numbers over the course of this next two to three years as this comes to play. But you're right, it has not materialized as we had anticipated it would starting here in the third quarter of 2025.

Our next question will come from the line of Tycho Peterson with Jefferies. Please go ahead. Hey, thanks. A couple on the model. So on the guidance, you obviously narrowed guidance last quarter. Now you're raising. Can you maybe just talk on for the fourth quarter, how much of that is price, collections, volume, just some of the nuances behind the guidance raise? And then any preliminary thoughts on 2026 you can share? Yeah, I'll take thanks, Tycho, and appreciate the question. Yes, let me clarify a little bit on that. As we guided to, let's talk about volume. We guided to fourth quarter volume of 52,000 to 54,000, with the midpoint being at 53,000. That would represent the midpoint, approximately an almost 17% increase year over year. On the price element, we guided a price of $1,400 to $1,420.

That price is inclusive of $4 million to $6 million in cash collection benefit that we anticipate to receive. And that's based upon our early read of collections in our record month in October. And then for the other line items, we guided towards both on product, pharmacy, and digital. It leads us to our overall revenue of $100 million to $105 million, with 103 being the midpoint. On 2026, any comments? In terms of 2026, we're going to defer any discussion on 2026 until after the clarity on the LCD. Okay. And then on net price collections, any color on modality? How much traction is it for kidney versus heart care versus lung? Heart care is our mature product, and we get a higher reimbursement rate on heart care. But with our kidney product, that's our fastest growing product now, where we don't get as well reimbursed there.

But we are seeing wins with our rev cycle management teams in improving those collection rates with kidney. So I would say that the product reimbursement mix doesn't have a significant impact, maybe one or two to three percentage points on the total price. Okay. And then I appreciate the comments earlier on IOTA. I guess, so how are you thinking about when that really does start to become more of a meaningful tailwind? I mean, I know it's kind of over five years, but when do you think that really kicks in? I mean. Our expectation was that it was going to kick in beginning this quarter. There has been, as I described, some media turmoil around transplantation, particularly. As regards this concept of jumping the waitlist, right? So going down the waitlist to find a better match for an organ.

And the centers, I think, slowed down some of their aggressiveness in transplantation in that regard because of the media attention to the issue. I believe that we've seen the government clarify their policy on that topic with the transplant centers and the OPOs that should lighten up the conservatism and allow them to get back to driving kidney transplantation more aggressively like we anticipate as a result of the IOTA program getting started. So I think here, as we go into the fourth quarter, we'll see a pickup, and then into 2026, more materially. Okay. Last one is just if the LCD goes through, is the $15 million surveillance headwind only for Medicare, or is that all patients? And if it's just for Medicare and that will require a protocol change for surveillance at the testing centers, I guess, what prevents all centers from adjusting to the new protocol?

Yeah. So great question. Thanks for that one, Tycho. So we have not seen any impact on utilization of the testing as a result of the LCD, and we did not model a change in clinician behavior and ordering. So the $15 million that we provided in the scenario that we described last quarter is really just a reimbursement headwind. We don't anticipate, and we are not going to message to clinicians that they change their behavior around utilization of the product because, as you can see in the LCD, there is room to change that policy. So if the evidence emerges that suggests that patients should get seven tests in the first year in specific scenarios or in general because it improves patient outcomes, then that policy may be modified.

At that point in time, we wouldn't want to have to go back and reconvince clinicians that they should do seven tests instead of four. So we continue to promote the utilization of the product as it was validated under the ARTS protocol, which is seven tests in the first year and four in every subsequent year. Okay. That's helpful. Thanks. Thank you. Our next question will come from the line of Mason Carico with Stephens. Please go ahead. Hi. Good afternoon. This is Harrison on for Mason. I wanted to start. If you could provide some insight into the delta in patient testing frequency at centers with protocols in place versus those without protocols. And for some of the centers that were early in readopting protocols, has testing frequency trended consistently higher towards your established testing protocols? Hi, Harrison. Thanks for the question. Certainly.

Since we reinitiated promotion of kidney surveillance protocols and protocol testing in August of 2024, we've seen growth in surveillance testing. And we commented last quarter that the growth in kidney surveillance or the growth in kidney volume in general was nearly 20% year over year. And that's a function of the readoption of those surveillance protocols and utilization of the testing. There are many, many centers, more beyond just the 60 that have adopted formal protocols that utilize surveillance testing at their centers from CareDx. You have centers where perhaps there's five clinicians and three of them do kidney surveillance and two of them don't, right, and only order it for cause. So there's heterogeneity in the use of the product even within some centers.

And so we have seen significant growth in the use of AlloSure Kidney across the market, and we believe that the bulk of that growth is a result today of readoption and reinitiation of those 60 surveillance protocols that we called out last quarter. Got it. Thanks. And then I know we've hit on IOTA a couple of times on this call, but have you seen any notable shifts in center behaviors now that that model is rolled out? Anything such as increase in compromised organs? Have you seen early signs of these centers leaning more into blood-based monitoring? I think we saw in the first half of the year and second half of last year increasing adoption of blood-based monitoring for surveillance in anticipation of the start of the IOTA program.

But in the third quarter, we have not seen growth in transplant volume in kidney transplant as a result of IOTA. And to your comment around or your question around compromised organs, this gets to the point I made on the earlier question about these volumes. The criticism that has been made in the media is around going down the waitlist and providing compromised organs to patients that are down the list rather than giving it to the patient at the top of the list because it's not a great match, right? Or that patient is 35 years old and rather giving them a compromised organ that's only going to last 10 years, wait for a better organ that's going to last them 30 or 40 years, right?

So the media on this topic, I think, has somewhat sensationalized an issue that is not really an issue because, as you note, when you have these compromised organs, they often go to patients that otherwise would not get an organ. And that's where we anticipate the IOTA program is going to drive growth in transplantation and the need for more intensive surveillance monitoring of those compromised organs. We have not seen that come to fruition as of yet, albeit we're only three months into the initiation of this program. Got it. Thanks for taking the questions. Our next question will come from the line of Brandon Kuyard with Wells Fargo. Please go ahead. Hey, thanks. Good afternoon. Dave, I just want to clarify one more time the prior period impact.

So if I'm thinking about this right, the $6 million in the third quarter and then the other $4-$6 million in the fourth quarter, that's incremental relative to the prior guidance, right, which you increased $4 million at the midpoint, but then you've got kind of $12 million of good guys. That would be incremental versus the prior guide, correct? Thanks, Brandon, for the question. We're including the prior period revenue in the guide. That's right. And so we raised the guide as a function of the collection of that prior period revenue. Okay. And John, we've talked about kind of the weaker market, the weaker transplant procedure volumes. Perhaps that's why you've sort of come in toward the lower end of your sequential volume growth expectations in Q3 and Q4 and kind of the implied 4Q guide.

I just want to make sure it's more of a softer market as opposed to a competitive dynamic. Could you speak to that element? Thanks. Yeah, absolutely. I don't think it's a competitive dynamic or a softer market. I think it was just a function of the seasonality in the business. We had a really exceptional July, and then we saw things just soften in August and September, and we expected a pickup. And it didn't occur. And therefore, we're maybe like half a point off of where we expected to end the quarter, one point or a half a point off from where we expected to end the quarter based on what we did in July from a volume perspective. But it's not a function of a competitive dynamic.

If anything, we're gaining accounts and really gaining accounts that as I described previously went away from surveillance testing to for-cause testing and now have turned back on surveillance, which is driving our growth in the kidney business line in particular, where we saw another quarter of nearly 20% growth year over year in our kidney business. And then just one on the pipeline, the HistoMap Kidney launch next year, do you expect that to be a revenue driver? What do you need to generate in terms of data to reimburse it for that product? Thanks. I do think it will. Thanks for the question, Andrew. I do think it will generate revenue for the company. Albeit nowhere near AlloSure-sized revenue because this is a test that will only be utilized in the setting of a patient having an elevated AlloSure.

They get a biopsy, and then they order the gene expression testing off of the biopsy. And so we think this is a really valuable product, particularly as we see potentially new anti-CD38 therapies coming to market for antibody-mediated rejection. And clinicians will want to know the subtype of rejection genomically of that patient from the tissue prior to treating the patient therapeutically. So we see a really interesting scenario there, kind of akin to comprehensive genomic profiling in the oncology market. So we're excited about HistoMap kidney coming into play. We certainly will be striving to have that product reimbursed. And in the current LCD, there is a pathway for that, particularly in the language where it says in the setting of an inconclusive biopsy. And so that's our thinking today related to the product. But we'll provide guidance around 2026 revenues in our Q4 call likely. Great.

Thank you. Our next question will come from the line of Ye Chen with HC Wainwright. Please go ahead. Hi. This is Katie on for Ye. Could you quantify the impact the SHORE study had on test adoption or volume growth? And do you think that's a lasting impact on adoption trends, or was that more of a short-term boost following that publication? Thanks, Katie, for the question. The SHORE data has had a significant impact on the adoption of HeartCare in heart transplantation dating back to April of 2024 at the ISHLT meeting where some of the initial data was first presented. And we saw significant strength in our heart transplant business throughout the year 2024 and then coming into 2025. And so what you're seeing now is the product of multiple analyses of that dataset in different contexts of use.

The first publication was focused on the utilization of biopsy and biopsy reduction. The second SHORE paper that was just published was focused on antibody-mediated rejection. And then the third SHORE paper, which has yet to be published, but the manuscript has been submitted, is focused on long-term outcomes and graft survival and the prognosis of graft survival utilizing HeartCare. And we're very excited to see that publication in press, hopefully before the end of the year. Thank you. I appreciate that. Thank you. And that will conclude our question and answer session and today's call. Thank you all for joining. You may now disconnect your line.

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