Veracyte Q3 2026 Earnings Call Transcript

Veracyte (NASDAQ:VCYT) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Veracyte’s Q3 2026 revenue increased by 15% year-over-year to $151.8 million, with strong profitability and cash generation.

The company is expanding its urology team by approximately 30% in 2027 to address Decipher Prostate’s growth challenges and capitalize on its bladder cancer portfolio.

Veracyte adjusted its Decipher Prostate annual volume growth expectations to 12,000-15,000 tests due to market normalization and competitive pressures.

Afirma delivered 19,000 tests, growing 12% year-over-year, and is positioned for continued growth due to utilization and share gains.

Prosigna was launched in the U.S. post-OPTIMA trial readout, with promising early demand and Medicare reimbursement secured for specific patient groups.

The acquisition of Convergent Genomics strengthens Veracyte’s bladder cancer portfolio, with plans to launch UroAmp in late 2028.

Full-year 2026 revenue guidance is adjusted to $590-$593 million, with adjusted EBITDA expected above 26%, reflecting strong profitability and cashflow.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to the Veracyte third quarter 2026 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Callie Gura, Director of Investor Relations. Please go ahead.

Callie Gura (Director of Investor Relations)

Good afternoon, everyone, and thank you for joining us today to review Veracyte’s third quarter 2026 financial results. Joining me on the call are Mark Stapley, our Chief Executive Officer, and Rebecca Chambers, our Chief Financial Officer. Dr. John F. Leite, our Chief Commercial Officer, will also be available for Q&A. Earlier this afternoon we issued a press release detailing our third quarter financial results and we posted an accompanying presentation in the Investor section of our website. Before we begin, I’d like to remind you that statements we make during this call will include forward-looking statements as defined under applicable securities laws. Forward-looking statements are subject to risks and uncertainties and the Company can give no assurance that they will prove to be correct.

The Company undertakes no obligation to update any forward-looking statements except as required by law. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Veracyte files with the Securities and Exchange Commission, including the most recent Forms 10-Q and 10-K. In addition, this call will include certain non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP financial measures are included in today’s earnings release accessible from the Investors section of Veracyte’s website.

I will now turn the call over to Mark Stapley, Veracyte’s CEO.

Marc Stapley (Chief Executive Officer)

Thank you, Kelly, and thank you all for joining us today. Third quarter revenue increased approximately 15% year over year to $151.8 million, and we delivered another quarter of strong profitability and cash generation. Afirma exceeded expectations while Decipher Prostate volume was lower than we expected. Today I will share our observations regarding these trends, the steps we are taking to support future growth, and why we remain confident in the long-term opportunity for all of our tests.

First, I’d like to highlight some of the exciting momentum we’re seeing across our portfolio. We have made good progress advancing our breast and bladder strategies over the last few months with the launches of Prosigna LDT for breast cancer and TRU MRD for muscle-invasive bladder cancer, or MIBC. In September, we strengthened our urology portfolio through the acquisition of Convergent Genomics, adding a urine-based technology platform that complements our tissue- and blood-based capabilities across the bladder cancer continuum.

We also advanced our market access strategies in breast, prostate, and bladder cancer, helping preserve and expand access to our valuable tests for Medicare-eligible patients. Now I’ll walk through our performance across each of our growth drivers. Starting with Decipher Prostate. We delivered nearly 30,000 tests in the third quarter, representing 12% year-over-year growth, with volume approximately 1,000 tests lower than we expected. We’re disappointed by that shortfall but believe we have identified the underlying drivers and are taking action to address them. Firstly, we now believe that the prior favorable guideline updates developed by NCCN for the 2023 and 2024 practice guidelines drove a temporal acceleration in physician adoption, resulting in two years of outsized growth.

Physicians who began or increased ordering following those updates remain engaged, and their order volumes are still growing. However, we believe that growth is now normalizing. Secondly, as discussed last quarter, the 2026 NCCN Low Risk guideline change impacting genetic classifiers and MMAI tests, as well as a shift to more low-risk patients choosing active surveillance without undergoing further testing, has moderated growth in that setting to single digits.

Thirdly, novel technologies such as digital pathology have drawn attention as physicians consider how to incorporate those tools into their patient care pathways alongside the Decipher test. This requires our commercial team to spend more time discussing the clinical utility of molecular information, the strength and differentiation of Decipher’s broad evidence base, and the complementarity of digital pathology and AI-based tools. Taking time away from core selling to address this, as well as our expanding portfolio of urology products, we are taking a multi-pronged approach beginning with greater investment in the channel. Rather than our typical handful of sales hires annually, we plan to expand the urology team by approximately 30% next year across field representatives, medical science liaisons, and sales leadership. This will enable our representatives to focus on core selling while continuing to grow the commercial channel to deliver high-value transcriptome and MRD testing with Decipher, Bladder TRU MRD, and, over time, UroAmp.

We are also expanding our efforts to generate and articulate new predictive and prognostic claims for Decipher as well as other important tumor molecular features. Decipher is the most widely validated test in prostate cancer with growing evidence for broader uses in both localized and metastatic disease. As care standards and treatments evolve, we will strengthen our evidence generation flywheel by adding additional bioinformatics capabilities to capture real-world evidence of Decipher’s benefit and support analysis of key ongoing clinical studies.

While we believe these investments will support broader adoption and deeper utilization, helping sustain Decipher’s growth, given the factors mentioned, we are resetting our incremental annual volume growth expectations to 12,000 to 15,000 tests, with the low end as a reasonable floor for now. Several catalysts could help us reach or exceed the high end of this range, including new predictive evidence further validating Decipher’s use across the cancer continuum, key Phase 3 trial readouts spanning all risk categories, and continued evolution of our offering with new molecular and digital pathology insights to help inform patient care.

We have advanced these catalysts, generating three new predictive claims in recent months. At ASTRO, an analysis from the Phase 3 NRG/RTOG 0815 trial provided new predictive evidence for Decipher in intermediate-risk prostate cancer, the largest market segment where treatment intensity remains uncertain. The data show that Decipher can help identify patients more likely to benefit from the addition of short-term hormone therapy to radiation, extending its evidence in this setting from prognosis to prediction.

Last week at the ESMO World Congress, new predictive evidence from the Phase 3 STAMPEDE trial further expanded Decipher’s evidence in clinically very-high-risk, node-negative, non-metastatic disease, demonstrating the test’s ability to help identify which patients may benefit most from adding abiraterone to standard hormone therapy. This builds on Decipher’s well-established role in high and very-high-risk prostate cancer, including prior STAMPEDE prognostic data that were recently incorporated in the NCCN 2027 prostate cancer guidelines.

And earlier this summer at ASCO, data from the ENZAMET trial provided predictive evidence for Decipher in metastatic hormone-sensitive prostate cancer. Continued investment in new claims is essential to build evidence across the risk continuum. Potential catalysts, if positive, include readouts from the prospective NCI-sponsored Phase 3 GUIDANCE and PREDICT-RT randomized trials, which are now fully enrolled. They are evaluating treatment intensification and de-intensification in intermediate- and high-risk disease, respectively, using Decipher as an integral biomarker to determine eligibility or treatment assignment.

And as discussed last quarter, Phase 3 low-risk studies, including Jenny Sbase and G. Major, are evaluating Decipher’s role in active surveillance decisions and could begin reporting preliminary findings as early as next year. Finally, one of our key differentiators is the combination of GRID and our collaborations with the academic community, which enables us to continually expand the insights we can deliver to physicians. And as prostate care becomes increasingly complex, we are bringing clinically validated signatures including PORTOS, PTEN, and PAM50 into our Molecular Features Report to provide additional insights.

DPAI represents another opportunity to build on this strategy by bringing molecular and digital pathology insights together to better inform prostate cancer care. We expect our first publication on our DPAI algorithm in the next few quarters, building on the data presented at ASCO GU last year and fueling further research in this important area. We believe this will lead to multiple publications supporting the complementary use of DPAI alongside molecular testing in settings where it can add clinical value to the Decipher result.

In summary, our confidence in Decipher’s long-term opportunity is unchanged. The franchise is growing across all risk categories, gaining share and penetration, with ongoing prospective studies designed to generate level one evidence across low-, intermediate-, high-risk, and metastatic disease. Notably, many of these trials were started more than a decade ago and are anticipated to read out over the next few years, efforts that to our knowledge have not been replicated.

As evidence standards rise, we believe this depth and breadth will further differentiate Decipher, expand adoption and utilization, and help address the approximately 334,000 men diagnosed annually in the U.S. We continue to view 80% market share and 80% penetration as appropriate, achievable long-term targets supported by Decipher’s differentiated evidence base and expanding evidence pipeline. Turning now to Afirma, we delivered another exceptionally strong quarter driven by approximately 19,000 tests, 12% year over year, fueled by deeper utilization among existing physicians and continued share gains, with the strongest sequential Q3 volume increase since 2020. This performance underscores our data-driven evidence generation approach and our leadership in thyroid nodule molecular diagnostics. Further, our v2 transcriptome workflow significantly reduced the no-result rate, helping more patients receive results and contributing approximately 300 basis points to the year-over-year volume growth this quarter.

We increasingly use Afirma GRID to support academic and industry collaborations that could yield new signatures, molecular insights, and use cases, fueling further publications and presentations that expand Afirma’s evidence base. At this week’s American Thyroid Association, or ATA, annual meeting, Afirma will be featured in no less than 10 posters and abstracts, including two oral presentations. Our strongest presence in recent years. The studies build on Afirma’s established diagnostic role and explore how gene expression data can illuminate cancer risk and biology.

We are very pleased with Afirma’s year-to-date performance and believe share gains, market growth, and deeper penetration position the franchise for continued growth in 2027 and beyond, supported by ongoing clinical evidence. Moving on to Prosigna, we launched the test in the U.S. a few months ago following the prospective Phase 3 OPTIMA readout, which provided practice-changing Level 1A evidence for treatment decisions. Prosigna identified more than two-thirds of clinically high-risk women who could safely avoid chemotherapy, one of the most consequential decisions in early-stage breast cancer. OPTIMA builds on an already substantial body of evidence, including 157 publications to date featuring Prosigna and more than 1,200 featuring the PAM50 classifier on which the test is built.

That evidence has already supported Prosigna’s inclusion in NCCN guidelines for node-negative patients as well as those with one to three positive lymph nodes, based on its prognostic ability to assess risk of recurrence. Looking ahead, we believe the OPTIMA data will, once published in early 2027, expand Prosigna’s role in guidelines by supporting its ability to predict chemotherapy benefit in higher-risk patients, including premenopausal women.

A late-breaking health economic analysis presented at ESMO showed Prosigna-guided treatment can deliver meaningful cost savings for the U.K. health system, potentially reducing chemotherapy-related costs by millions of pounds annually. Quality-of-life analyses for patients within the OPTIMA trial, expected at the San Antonio Breast Cancer Symposium in December, will add evidence on clinical utility and patient impact. We also have more than 20 studies that are either ongoing or have completed and are pending publication.

These studies will strengthen our prospective and retrospective data, including head-to-head comparisons across pre- and postmenopausal patients, and for those that are node-negative and node-positive. Together, the strength and breadth of this evidence reinforce Prosigna’s ability to help predict chemotherapy benefit beyond what can be determined by clinical risk factors. This differentiation gives us confidence in Prosigna’s ability to address the significant market opportunity ahead, where approximately 225,000 patients are diagnosed with ER-positive, HER2-negative breast cancer in the U.S. each year.

We are seeing encouraging early demand following the launch, particularly in patient populations where the OPTIMA data are most differentiated. Physicians have also responded positively to the intrinsic subtype information provided with every Prosigna result, which offers additional insights into the underlying biology of a patient’s cancer. We also recently secured Medicare reimbursement for postmenopausal women with early-stage ER-positive breast cancer who meet the applicable Medicare criteria, including stage one or two disease and zero to three positive nodes, further supporting access for eligible patients.

We are on track to grow our dedicated medical oncology commercial team to 15 representatives by year end, doubling our original goal, and as we move into 2027, we plan to enhance the customer experience and ordering workflows to make Prosigna easier to incorporate into routine practice. During the quarter, we also saw significant momentum outside the U.S., where Prosigna is already well established as an IVD test product. Revenue grew 40% year over year, driven by strong adoption of Prosigna IVD primarily in the U.K. and Nordic region following the OPTIMA readout.

We continue to expect Prosigna to drive meaningful share gains over the next two to five years and become an important growth driver for Veracyte while helping more physicians make better-informed treatment decisions for patients with breast cancer. Turning now to bladder cancer, our recent acquisition of Convergent Genomics strengthens our position by adding UroAmp, a differentiated urine-based tumor DNA platform. Together with Decipher Bladder for tissue-based risk stratification and TRU MRD MIBC for blood-based recurrence monitoring, we are building a portfolio spanning non–muscle-invasive and muscle-invasive disease to inform bladder cancer care from diagnosis through post-treatment surveillance.

Approximately 85,000 patients are diagnosed with bladder cancer each year in the U.S., including 65,000 with non–muscle-invasive bladder cancer, or NMIBC. Urine is particularly well suited for testing in NMIBC because it comes into direct contact with bladder tumors, while localized disease may shed limited tumor DNA into blood. UroAmp addresses this critical unmet need with our initial focus on three applications: informing the post-induction maintenance decision, monitoring response to therapy, and post-treatment surveillance.

UroAmp has a strong evidence base with nine peer-reviewed publications and more than 40 abstracts and posters. Four additional abstracts have been accepted for the upcoming Society of Urologic Oncology, or SUO, annual meeting, including data from the prospective INSITE trial evaluating the clinical utility of UroAmp for our first application informing the post-induction maintenance decision. This data has also been accepted for peer-review publication, helping support the technical assessment for reimbursement and representing an important step toward commercialization.

We expect to launch our first UroAmp application in late 2028 with Medicare reimbursement, with additional applications to follow. Earlier this year we launched our first commercial TRU MRD test after securing Medicare reimbursement for recurrence monitoring in patients with MIBC following radical cystectomy. TRU MRD uses whole-genome sequencing for both the landmark test and longitudinal monitoring, providing a broader view of tumor biology and the ability to track tumor evolution over time. We believe this is an important differentiator with potential to extend to additional tumor types and clinical applications.

We expect the bladder opportunity to build over time, beginning with broader adoption and expanding clinical utility for Decipher Bladder in 2027, followed by more meaningful contributions from the portfolio in 2028 and beyond as UroAmp applications launch and additional TRU MRD indications gain reimbursement. Together, these tests uniquely combine to determine risk of progression, predict response to therapy, monitor for recurrence, and track the genomic landscape as the cancer evolves, while also determining the time point that localized disease becomes systemic.

In closing, we remain confident in our business and opportunities ahead. Our consistent growth over the past several years reflects the strength of our portfolio and the scale we have built. We believe we are well positioned to build on that momentum with exceptional Afirma performance, an expanding Decipher evidence base that supports its long-term opportunity, and strong investment in our growth drivers. I’m particularly proud that during the quarter we served our one millionth patient, a milestone that reflects the impact we are having and the reach of our tests.

I would like to thank the entire Veracyte team who made this milestone possible. With that, I’ll turn the call over to Rebecca.

Rebecca Chambers (Chief Financial Officer)

Thanks, Marc. Third quarter revenue grew 15% year over year to $151.8 million and total volume increased 15% to approximately 52,700 tests. We generated $40.3 million of cash from operations and ended the quarter with $370.5 million in cash, cash equivalents and short-term investments. After a $150 million cash payment for the acquisition of Convergent Genomics, testing revenue grew 15% year over year to $146.4 million, driven by 12% Decipher Prostate and 19% Afirma growth.

Testing volume increased 13% to 49,498 tests and ASP increased 1% to $2,960, including approximately $2.5 million in prior period collections, or PPCs. Excluding PPCs, normalized ASP rose 2% compared to the prior year to approximately $2,900, reflecting sustained pricing gains from operational improvements implemented over recent years and managed care wins. Turning to gross margin and operating expenses, I’ll focus on our non-GAAP results. Non-GAAP gross margin was 73.7%, up 90 basis points year over year, driven by strength in our testing business. Testing gross margin increased approximately 70 basis points to 74.7%, reflecting operational efficiencies from our V2 transcriptome workflow and higher ASP. Non-GAAP operating expenses rose 24% year over year to $72.9 million. As discussed, we moved software development and project management costs from G&A to R&D to reflect their full focus on product development.

R&D increased $15.2 million to $29.2 million, with approximately $6 million from the realignment and the remainder from increased product investment. Sales and marketing rose $3.5 million to $25.9 million, with approximately half of the increase funding our new Prosigna sales team. G&A declined $4.5 million to $17.8 million, reflecting primarily the movement of cost centers. GAAP net income was $31.5 million. Adjusted EBITDA reached $41.2 million, or 27.2% of revenue, exceeding our 25% annual long-term target.

Turning to our 2026 outlook, we now expect full-year revenue of $590 million to $593 million, up 14% to 15% year over year, versus $590 million to $596 million previously. We expect testing revenue of $571 million to $573 million, up 16% as compared to our prior expectations of $576 million to $582 million. We expect approximately $10 million in other testing revenue from cytology services and Decipher Bladder, with minimal contributions from recently launched tests.

As Marc noted, early U.S. Prosigna demand is encouraging and the patient mix to date suggests only a modest portion of volume will translate into fourth quarter revenue. Our guidance assumes approximately 16% Decipher Prostate revenue growth, with full-year ASP slightly above 2025 reflecting year-to-date PPCs and stronger-than-expected ASP performance. Quarter-to-date trends are encouraging versus Q3, but with two fewer selling days in the fourth quarter we expect volume to be roughly flat.

Sequentially for Afirma, we raised revenue growth guidance to approximately 16% from 12% to 14%, reflecting Q3 outperformance, favorable year-to-date prior period collections, continued ASP improvement, and an expected approximately 3% full-year no-result-rate benefit in the fourth quarter of 2025. The V2 transcriptome improved the no-result rate by approximately 200 basis points. We expect continued benefit this year, though with a smaller year-over-year impact compared to what we’ve seen year to date.

Strong year-to-date profitability supports maintaining our adjusted EBITDA guidance above 26%. It also creates a reasonable possibility that a potential partial release of the valuation allowance could favorably impact our effective tax rate on a GAAP basis within the next 12 months. Looking ahead, we’d like to share our preliminary view of 2027, starting with key headwinds and tailwinds, most of which have been discussed previously. We currently expect Decipher volume growth near the 12,000 incremental test floor mark outlined, allowing time to assess how the catalysts discussed affect the business over coming quarters. We expect approximately 5% Afirma volume growth as we lap the no-result-rate improvement from the V2 transcriptome transition.

PPCs contributed meaningfully to growth in 2026, with approximately $6 million for Afirma and $4.5 million for Decipher recognized year to date. Given PPCs have uncertain timing and magnitude, we typically exclude them from guidance, creating a tougher 2027 comparison. Much of the Afirma 2026 PPCs resolve payments related to last year’s LBM issues, so we don’t expect that outside level to reoccur. Excluding PPCs, we expect the strong ASP gains this year to persist in 2027 and beyond, supporting underlying revenue growth.

Our Prosigna and TRU-MRD revenue expectations remain modest, reflecting typical first-year adoption timelines and limited coverage for our current Prosigna sample mix, despite encouraging reimbursement progress. Establishing commercial payer contracts and collection history takes time. Given these factors and our volume mix to date, we expect Prosigna ASP to be similar to our cost per test in the near term. As a result of these dynamics, we expect approximately 10% total volume growth and mid-single-digit total revenue growth next year, with prior-period collection dynamics and revenue mix accounting for the difference.

We expect approximately 22% adjusted EBITDA for the full year, with Q1 representing the low point due to expense timing and before margins improve to approximately 25% as we exit the year. This outlook reflects continued investment in growth, including expanded Decipher sales and marketing, while our long-term adjusted EBITDA goal remains unchanged at 25%. As we move through 2027 and into 2028 and beyond, we believe that growth will accelerate due to expanding evidence for Decipher Prostate around all risk categories, as well as increased momentum surrounding our newer growth drivers, namely breast and bladder, which will contribute in 2027 but to a greater extent in 2028 and beyond. We expect our differentiated financial profile to sustain strong profitability and cash flow while funding long-term portfolio opportunities.

Reflecting on this profile of favorable long-term trends, strong cash generation, and confidence in our outlook, our board authorized a share repurchase program of up to $100 million. In closing, despite our moderated near-term expectations, we are confident in the long-term trajectory of our business. Our vision is to transform cancer care for patients all over the world, and we continue to do this with our growing portfolio of tests spanning bladder, prostate, thyroid and breast cancer.

We’ll now move to the Q&A portion of the call. Operator, please open the lines.

OPERATOR

Thank you. At this time, we will conduct a question-and-answer session. As a reminder, to ask a question, you will need to press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press Star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Puneet Souda from Leerink Partners. Your line is now open.

Puneet Souda (Analyst)

Hi, guys. Thanks for the questions here. First one: look, Decipher is your largest revenue product. It has very strong clinical evidence that you have built with NCCN inclusion, and the volumes have been strong. Just I’m trying to understand—I mean, look, you missed the volumes slightly last quarter, lowered the volume expectation, and this is another miss which comes as a surprise to us. So just trying to understand why this is not a structural bleed in volumes that could accelerate further.

Why is 12,000 an annual volume increase that you’re talking about for Decipher the right floor, when just one quarter ago it was 20,000? You know, 20,000 was the right number in your mind. And I have a follow-up.

Marc Stapley (Chief Executive Officer)

Yeah, thanks, Puneet. That’s a fair question. Let me take you through it. I mean, we cited on the call three factors that we’ve analyzed for this quarter, and last quarter we talked about the low. That was clearly the first impact we saw, and that’s continuing this quarter. But to your point, as you mentioned, the NCCN guidelines and the strong evidence drove what we now believe is two years of outsized growth. In fact, it fueled growth very strongly for late ’23 into early ’24 and then ’25, and it feels like we’re now coming off the back of that and getting to a more normalized level of growth.

And so what is that new normalized level of growth? If you think about the second half of this year, based on the guidance that we’ve given you in the Q3 result, we’re running at about—call it a run rate of 12,000 tests a year. We’ve also done a lot of internal forecasting and analysis of what that range should be, that normalized range, and that’s where the 12 to 15 came from. And we feel, as a team, very confident in the 12. But we think it’s prudent and important and transparent to build our business around that 12, including how we think about resourcing, how we think about profitability, how we align and focus our teams, rather than on a higher number. And then, as the year progresses, that gives us an opportunity to revisit that. And then we also felt it important to share that today so that you will have some sense of what we’re thinking.

Now, I’ll be clear. Our budget isn’t done yet. It hasn’t been approved by the board. We’ll continue to work through that as we normally do during this cycle of Q3 and Q4, but we feel very confident in that 12,000 number at this point. And I don’t anticipate that changing between now and Q4, to be clear. That’s why we’re giving it to you now.

Puneet Souda (Analyst)

Okay. And then on the competitive front, I think you talked about digital pathology. Just wanted to understand—look, there is a competitive digital pathology assay that saw a step-up in promotional activity from a peer, from a competitor, through 2Q. Are you seeing an impact from that? And are you seeing any competitive impact from the AI tests that are also in NCCN now and competing with Decipher?

Marc Stapley (Chief Executive Officer)

So Decipher is still—it’s still growing, right? Which means we’re adding new customers and existing customers are expanding use. What we’re seeing here is the accelerated growth we had has moderated, but we’re still growing in Decipher. Right. So we’re still growing into the white space and we’re still taking share. What we are seeing is activity—you mentioned it—promotional activity around DPI is one good example of a recent new product that is getting some attention from physicians.

And that requires our sales teams to spend quite a lot of their time effectively talking through the difference between molecular testing and digital pathology, the evidence base for Decipher, how to interpret guidelines, and so on. And so that’s clearly a distraction. That means that they’re not able to spend as much time on core selling activities. And so, to target that, Puneet, what we’re doing is, as I mentioned on the call, we’re increasing our resources on the sell side by 30%, which is significant. So the customers are going to feel it, the other players in the market are going to feel it. That’s a significant increase. But we’re going to do it thoughtfully, appropriately, and not rush into it. We don’t want to change our quality and our culture around our sales team. They’re very high performing, and we want to keep it that way.

But it’ll certainly be felt out there as well. So that’s how we think about that. So don’t think about that as we’re not losing share; there is some mind share that needs to be regained.

Puneet Souda (Analyst)

And last one maybe for Rebecca, you’re hiring more reps in ’27. Opex is going to be higher. You talked about adjusted EBITDA being lower. I’m just trying to understand how are you thinking about any offsets to that? I think you called 22% adjusted EBITDA margin for first quarter being the low and then improving from that. But I’m just trying to understand TruMRD and Prosigna still are 2028. So what are some of the things that can help you offset and continue to improve profitability?

Rebecca Chambers (Chief Financial Officer)

Yeah, Puneet, thanks for the question. Just to clarify, 22% was for the full year and exiting the year at 25. So Q1 will actually be below that 22% given the timing of spending. What could take that number higher is prior period collections. As you know, we do not guide to prior period collections and so those tend to flow through quite nicely and then just operational efficiencies. You know, we have gone through the organization with a fine-tooth comb at this point in time, obviously given the revenue delta over the last couple of months versus our prior expectations, and have succeeded in getting to that 22% number, which I think, given the revenue delta, is quite powerful and quite a powerful statement for the profitability of our business overall.

And so you always have things that could be timing-related in nature or prior-period in nature. Better ASP ex prior periods as well could help profitability, and then just vacancy. So, you know, I think there we tend to budget to a certain number. That number for next year is 22% and that’s what we’re aiming for at least, and hopefully the board will align with that, and then from there, you know, hopefully we will underspend and outperform. But that’s, you know, not for today’s call.

That’s for the future.

Puneet Souda (Analyst)

Okay, I’ll hop back in the queue, thanks.

OPERATOR

Thank you. Our next question comes from Subu Nambi from Guggenheim. Please go ahead.

Ethan (Analyst)

Hi, this is Ethan on for Subu. Thanks for taking our question. Just on Prosigna Medicare coverage follows the original LCD, so it’s limited to postmenopausal patients with zero to three nodes. But Optima’s strongest data is in premenopausal patients and those with four to nine nodes. So we were just wondering, what’s the timeline for asking Medicare to expand the LCD and how far along are commercial payers for premenopausal patients?

Marc Stapley (Chief Executive Officer)

Yeah, so, by the way, obviously, we were very happy to get that coverage. And to your point, it was absolutely tied to the original LCD. And there is a process we’ll need to go through to get the four to nine nodes covered, of course, but that is a small part of the market. And it’s also—I think it’s also the hook that will bring some customers to Prosigna, but not the only one. And I think it’ll take a while to get that included in the LCD. Of course, premenopausal is more commercial coverage, and we have some commercial coverage and plans to get into contracts around that as well.

And we expect the Optima data, when published, to be a key component of getting that done. Anything you want to add, John, on the reimbursement side?

John F. Leite (Chief Commercial Officer)

Not on the reimbursement side, but just on the Optima data itself. It’s important to remember that most importantly, aside from the clinical impact that Optima had on premenopausal patients and on patients with higher node burden, is the fact that it found that nodes of themselves are not predictive of chemosensitivity. So we believe the opportunity is far broader than just the premenopausal population with high node burden.

Rebecca Chambers (Chief Financial Officer)

And then just one last thing to call out. And this is effectively one of the factors in the delta between the volume and revenue guide for next year. And effectively what we have assumed for Prosigna ASP is that it’s roughly approximating cost. And that is exactly for the reason, Ethan, that you highlighted vis-à-vis the Medicare policy, as well as commercial.

Ethan (Analyst)

Thank you, guys.

OPERATOR

Thank you. Our next question comes from Doug Schrinkel from UBS. Please go ahead.

Doug Schrinkel (Analyst)

Hey, good afternoon. A few here. You’re increasing commercial investment to address the challenges facing Decipher while also pursuing the Prosigna opportunity. How are you gonna sequence those priorities and allocate resources so that strengthening the core and expanding Prosigna reinforce each other rather than compete? Specifically, what can leverage the existing commercial infrastructure? What requires incremental investment, and what milestones will guide and gate the pace of expansion?

Because it does seem like, given the current situation, you’re taking on a bit more than, I think, most of us thought you were going to be taking on as we turn to 2027.

Marc Stapley (Chief Executive Officer)

Yeah, thanks, Doug. Great question. So a couple things. Firstly, on the Decipher—the urology sales team—let me talk about that. One component of that is giving small resources out in the field to help with the messaging, as I talked about, around other emerging technologies, and to bolster the sales team there. But also, and this is important, a key component of adding our resources there is we’ve built a urology portfolio that’s extensive and broad—between prostate, bladder with TruMRD, and then obviously our acquisition of the UroAmp product line with tissue-, blood-, and urine-based testing.

We have to make sure that we have sufficient resources to cover all of that, and while maintaining—in fact maintaining and increasing—the focus on core Decipher as well in prostate, given the dynamics I talked about. So that’s the first thing. Part of that 30% investment is—it’s a portfolio investment, it’s not just Decipher Prostate. And as I said, we’ll be thoughtful about how we add that. We know how to build that sales team and align territories.

And so I’m not concerned about that. I’m also not concerned about any competition for resources. With Prosigna, separate sales teams—the Prosigna team will grow to 15, which is double our original estimation. And I’m very comfortable with how we’ll focus our time on building that team as well. So the sequencing will be very much in parallel, done very much independently of each other. And while you’re right, I think we are doing more than we might have originally anticipated doing next year in terms of building those resources, that doesn’t faze me at all.

Rebecca Chambers (Chief Financial Officer)

And maybe to your question on shared resources, Doug, it’s actually a great one. The way we’ve structured the operations of this organization—effectively, we have one team across customer service, billing, and the lab, and effectively we’ll be able to leverage all of those quite nicely as volumes scale. The other thing we’ve done, and I’m pretty sure you’re aware of this, is we’ve introduced our new V2 transcriptome, which effectively is the backbone of both Afirma and Prosigna.

And so introducing new products into the lab has been much less disruptive. Between having a whole transcriptome workflow as well as the whole genome workflow, we really have effectively the entirety of what we need right now from a laboratory infrastructure perspective. And so I think when it comes down to it, those are the types of resources that we’ll be able to leverage as both of these portfolios ramp, whether it’s the Prosigna or the urology portfolio opportunity that Mark mentioned.

Doug Schrinkel (Analyst)

Okay, thank you for that, Rebecca. Decipher revenue growth appears poised to fall below 10% in your 2027 construct. I want to make sure I have that and if I’m in the right neighborhood. When you contemplate the addressable market, the penetration of the market opportunity, competitive dynamics, which—that combined with guideline changes—clearly came back to get you here in a way that you didn’t expect. Can we look at this as a sustainable double-digit growth business in the long term, or does this look more like a single-digit grower, factoring in all of these things?

Again, I know there’s things you’re trying to do to reinvigorate this, but there’s a lot of variables in this equation that suggest to me that 10% might be the ceiling, at least as we’re thinking about multi-year models.

Rebecca Chambers (Chief Financial Officer)

Yeah, it’s a good question, Doug. And I think the 12,000 to 15,000 test cadence is the right one next year. We do have a lot of unique situations. We do not guide with prior periods, and we had $4.5 million of prior periods year to date for Decipher. And so when it comes down to it, that 12,000 to 15,000 range we think we’re very comfortable with. Then there are other opportunities above and beyond Decipher Prostate in the urology portfolio that we think can help augment the company to a double-digit growth number.

And obviously, you know, Afirma and Decipher continuing to grow nicely is core to that. But if you look at UroAmp, if you look at Decipher Bladder, TruMRD, Prosigna, you know, we do think this is a double-digit opportunity at the highest level across the entirety of the portfolio. And what is growing double digits within that portfolio at any given point in time is going to ebb and flow based on things like prior periods and comps and the V2 transcriptome and all the different nits and gnats, if you will.

But this is a great business, it’s a great portfolio, it’s incredibly profitable, it throws off a ton of cash, and the top line is growing and volume growing. Ten percent next year is a good indication of that. And you do see embedded in that guide some, you know, significant growth from Prosigna, Decipher Bladder, and to a much lesser extent, TruMRD.

Doug Schrinkel (Analyst)

Okay, last one, ASPs. I know you said take out the prior period collections. What does that mean for Afirma and Decipher next year? What should we be plugging into our models?

Rebecca Chambers (Chief Financial Officer)

I think ex PPCs, you can put the current run rate in there for next year and that should get you pretty close.

Doug Schrinkel (Analyst)

Okay, thank you.

Rebecca Chambers (Chief Financial Officer)

And that doesn’t take into account, obviously, any managed care wins between now and, you know, the timeframe that we’re discussing.

OPERATOR

Thank you. Our next question comes from Tycho Peterson from Jefferies. Please go ahead.

Lauren (Analyst)

Hey team, this is Lauren on for Tycho. Just a few more on Decipher. Are you still adding new ordering physicians for Decipher at the same pace? And if so, does the volume miss imply your utilization per physician is weakening, or is it more so softness weighted towards the low risk? And I guess on that same metric, are critical call points—going into 2027, do you kind of see necessity to have low risk return to growth to hit kind of the double-digit volume growth targets as the market becomes more penetrated and competitive?

Marc Stapley (Chief Executive Officer)

Yeah. So I’ll ask John to talk about the dynamics with respect to the addition of physicians and physician utilization.

John F. Leite (Chief Commercial Officer)

Sure. So yeah. So the addition of new ordering physicians does outpace—or I should say is the more important driver of our growth. Overall, our orders per physician has been fairly stable over the last few quarters. Which tells you that there are a cadre of physicians who have been ordering Decipher for a longer period of time, who are much more high-volume orderers as opposed to those who’ve just joined, who order at a lower rate until such time as they secure more tenure and then start ordering at a higher rate.

So overall, to maintain that steady orders-per-doc as we’re adding new docs, you can tell that there’s a bucket of physicians that just order more as they progress over time.

Marc Stapley (Chief Executive Officer)

Yeah, I mean one of the, you know, when you look at the numbers in the third quarter, we actually saw some growth in new physicians. In fact, we’re seeing that go into October as well. New and reactivated physicians. And I think John’s spot on there. Now, when they come on, they come on at a lower ordering rate per physician. And obviously the better you do at that, the more you dilute and drag down that metric. I’d say when you look at the active, loyal physicians, you’ve got that group at the top that are more penetrated and then you’ve got the tier below them that are becoming the new top tier. So I think there’s a lot of these dynamics going on. The high-level message: we’re seeing both new physician adds, and for those physicians that are in the lower tier, they’re starting to order more. The exception to that is low risk. The low risk has—that’s why we say single-digit growth, low single-digit growth.

It is more a case of physicians are engaged and they remain engaged, but they’re not growing at the same rate that they used to, and their utilization isn’t growing at the rate that it used to.

John F. Leite (Chief Commercial Officer)

And then the only thing to add to that, Lauren, is that you asked about low risk. Next year we’re not going to bifurcate by risk category or guide. It’s pretty early to even have a guide, let alone to do so. But I think when it comes down to it, on the back of the 0815 data, intermediate is going to continue to be incredibly important for us and we’re seeing good momentum there post that data being released. And, you know, low, we aren’t necessarily assuming any material changes or that there are any catalysts that, you know, Marc cited.

We do expect those catalysts to be coming out over the next few years, but that’s not assumed in anything for that in the ’27 number specific to low.

Lauren (Analyst)

Perfect. Thank you.

OPERATOR

Thank you. Our next question comes from Mason Carricko from Stephens Inc. Please go ahead.

Mason Carricko (Analyst)

Hey guys, thanks for the question here. I’m going to ask a question that you guys may have just said that you’re not going to break out, but I’ll try anyway. So the 12,000 to 15,000 Decipher unit kind of change to the outlook here, I guess. Could you just clarify the delta between that and 20? What is lowered expectations from low risk compared to last quarter? How much is a step down in intermediate and high risk expectations?

John F. Leite (Chief Commercial Officer)

Yeah, Mason, you were correct. I think at this point in time, quantifying that would be an exercise in futility. I think when it comes down to it, the dynamics we talked about in the prepared remarks was low continues to be the same dynamic that we spoke about in Q2. The competitive noise is taking more time away from the field, which is why we’re increasing our commercial activity so significantly. And I think we aren’t necessarily seeing anything dramatic or anything even slightly negative—actually the contrary—on intermediate and high post the 0815 and ESMO data in high risk.

And so I don’t want to quantify those, but I think the dynamics underlying are pretty clear at this point in time. And I think we’re doing great things in the intermediate and high category, and low is a function of the overall market dynamic.

Mason Carricko (Analyst)

Got it. Okay. And then maybe moving to Prosigna. I think on the Q2 call you guys called out you were engaged with 100-plus institutions. Would you be willing to share how many have moved from evaluation to ordering at this point, and if adoption has skewed more towards certain patient segments or maybe institutions adopting across the broader patient population for that test?

John F. Leite (Chief Commercial Officer)

Yeah, thanks for the question. Yeah, we are continuing to add more institutions, which is a clear leading indicator for us. Of those, we’re starting to see more and more institutions that are becoming repeat orderers, which is another solid leading indicator for us. And then lastly to your point, we are looking at whether the case mix changes significantly. As you can imagine, in these early-adopter days, they’re testing the test on the patient population that’s currently underserved by the current providers, and that’s where the OPTIMA trial data had its highest impact.

The next leading indicator for us is to monitor the transition of those ordering patterns towards the broader, more representative population.

Mason Carricko (Analyst)

Got it. Thank you. I’ll leave it at that.

John F. Leite (Chief Commercial Officer)

Thanks, Mason.

OPERATOR

Thank you. Our next question comes from Colin Mixon from Canaccord Genuity. Please go ahead.

Colin Mixon (Analyst)

Yeah. Hey guys, thanks for the questions. I think you talked about how you’ll be expanding the urology commerce team by like 30% or so next year. But just in terms of qualitatively how that kind of call point end market is evolving, given I guess competitors have some kind of bladder cancer stuff going on as well as prostates evolving too. So maybe how are urologists and, similarly, oncologists thinking about maybe this area now from end to end, the whole continuum?

And why does the Convergent sort of addition here address that? Thanks.

Marc Stapley (Chief Executive Officer)

I think in the urologist market, we’re not seeing much change in our engagement with them. Certainly on the prostate side, the level of interest in molecular diagnostics, we don’t see that going in any direction other than up. And that’s why we still feel 80% penetration—80% share—is the goal there. And that would be urologists and rad oncs. Now, the bladder fits so beautifully into that market and that channel. And we want to make sure that as we launch and really resurge the level of activity around Decipher Bladder, as we push on TruMRD, which we launched this year, and as we launch UroAmp, we are really working with that community around recognizing the benefit of this multitude of tests in the portfolio. And so setting that up for these product launches is absolutely key. So, again, the same thing that we’re seeing in prostate—it is fueled by evidence.

And so getting publications out around the use of UroAmp and the utility, getting reimbursement, getting into guidelines are all part of the playbook that works very well. And that’s going to work the same way in bladder. Anything you want to add?

John F. Leite (Chief Commercial Officer)

Yeah, the only thing I would mention, just to touch on one of the points you had mentioned: the call points are exactly the same. The same physicians who are managing prostate cancer are also doing bladder, and their urological surgeons are following the same population. I’m sorry—it’s the same physicians following these two very distinct populations of patients. What we’re hearing about the addition of UroAmp is just that it’s incredibly complementary to our Decipher Bladder tissue test, which is going to become a focal point for us in 2027. It’s complementary to our TruMRD test in blood, which measures recurrences in more advanced systemic disease, whereas UroAmp is very much a solution for detection of recurrences in localized disease from the bladder. We’re sensing quite a bit of enthusiasm from ordering physicians and KOLs, and we’re pretty well set up for bladder cancer in 2027 and the future.

Marc Stapley (Chief Executive Officer)

One thing that I mentioned briefly in the remarks, but I want to make sure people pick up on it, is by having the multitude of tests that we have at the multiple stages of the patient journey in multiple sample types, we will be able to track the evolution of the patient’s cancer and tumor over time. And because we follow the same grid approach that we always do, which is we look at whole transcriptomes, we look at whole genomes, we will have incredibly rich and valuable data.

And we’ve seen a lot of interest around that, particularly in bladder cancer. And so that is becoming a much more important part of our conversation with collaborators and potential partners. And I think that’s one of the things I’m actually most excited about for this franchise going into 2027—the opportunity to expand on that. So more to come on that in the future as well.

Colin Mixon (Analyst)

Awesome. Thanks, guys. And I want to just lump two thoughts here on the last question versus on Prosigna. Is the plan to sort of expand the med onc reps next year as well, or are you going to be good to go with the 15 by year end here and you’ll kind of assess things going forward? And then secondly, want to ask for an update on the Decipher international plans. I don’t think you have touched on that yet. Thanks.

John F. Leite (Chief Commercial Officer)

Yeah. So on the Prosigna reps, yes, it is our plan to continue to add reps as we anticipate the growth in volume. We have a pretty prescriptive process about how we assess the opportunities within a territory, when it’s ready to place a new rep in either a vacant territory or to split the territory.

Marc Stapley (Chief Executive Officer)

On international, our goal still remains to get Decipher in the hands of physicians all around the world so it can be used to help patients with prostate cancer. We’re still very focused on Europe. I’d say one of the things with our acquisition of Convergent Genomics is we moved around a few priorities a little bit, including that one. There are multiple other ways that we are looking at making that happen in certain countries. Nothing that I can share on that at this time.

But, yeah, I’d say primary focus right now is shifting more so towards the bladder side as well as continuing to grow the core business.

OPERATOR

Thank you. Our next question comes from David Westenberg from Piper Sandler. Please go ahead.

Peron (Analyst)

Hey guys, this is Peron on for David Westenberg. Maybe I could ask the physician penetration question another way. Historically, have you ever broken out percentage of penetration divvied up between academic versus rural providers? And if so, you know, channel checks suggest that academic utilization is probably a little bit higher than rural. I guess, what percentage of sales reps and efforts are going to expanding rural new positions?

Marc Stapley (Chief Executive Officer)

Yeah, we haven’t broken it out. I’m not sure it would actually add a tremendous amount of value if we were able to do that. I mean, let’s just put it this way: we have our sales team focused on as much of the population as is actually possible and makes sense, because especially as you get out into the community, you don’t see as many cases, obviously. And that’s part of why we say 80% penetration. By the way, you don’t get to 100% penetration because in some cases you never get there.

But we’ve got them focused on all parts of the channel. I would say obviously in the academic centers, intermediate would be quite well penetrated. But there’s plenty of opportunity still in intermediate, high, and low. The catalysts that we talked about will be the catalysts that will drive growth in academic centers. And then obviously that will follow in the community, especially once you get guidelines. And the guidelines are more important to drive that community adoption, which is why we keep focusing on evidence and guidelines as being the fuel that drives this business.

So, no, I don’t think breaking it out actually would create a tremendous amount of value. The white space is significant. The penetration of our overall prostate cancer test, as we said coming into the year, was around 35%. There’s still plenty of opportunity to grow. The question I think we’re dealing with on this call is the velocity of that growth at this point, which is why we’re resetting to the 12 to 15. It’s not the opportunity.

Peron (Analyst)

Understood. Thanks guys.

Marc Stapley (Chief Executive Officer)

Thank you.

OPERATOR

Thank you. Our next question comes from Mike Metzen from Needham & Company. Please go ahead.

Mike Metzen (Analyst at Needham & Company)

Yeah, thanks. So I wanted to see if you could help me kind of bridge this 10% volume growth that you’re