Caris Life Sciences, Inc. Q4 FY2025 Earnings Call

Good afternoon, everyone, and welcome to the Caris Life Sciences Q4 2025 Earnings Call. My name is Dana, and I will be your coordinator today. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Russ Denton. Please go ahead.

Thank you. Earlier today, Caris Life Sciences released financial results for the quarter and year ended December 31, 2025. Joining the call from Caris today are David Dean Halbert, our Founder, Chairman and CEO; David Spetzler, our President; Brian Brille, our Vice Chairman and EVP; Bobby Hill, our Chief Commercial Officer; and Luke Power, our CFO. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. These risks are discussed in our SEC filings, including our quarterly reports on Form 10-Q and our annual report on Form 10-K to be filed with the SEC. Assessed as required by law, Caris disclaims any intention or obligation to update or revise financial projections and forward-looking statements whether because of new information, future events or otherwise. The information discussed in this conference call is accurate only as of the live broadcast. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the press release Caris issued today. A copy of today's presentation materials along with an interim readout of our Q1 study can be found on our website. I will now turn the call over to Brian.

Thanks, Russ, and thank you all for joining our Fourth Quarter 2025 Earnings Call. This is our first year-end call as a public company, following our June IPO last year, and we're pleased to report another record-breaking quarter, finishing the year with excellent performance across the company in terms of growth and underlying financial strength. I want to start with what has always mattered most at Caris, our mission. Caris was founded to make precision medicine a reality. We aim to fundamentally change the way disease is characterized and treated. We believe more information is more power and every patient deserves more power in the battle against disease. That mission is being powered by a molecular platform, which benefits from scale and highly differentiated capabilities as illustrated on Slide 3. Our platform continues to scale. And in 2025, we completed just under 200,000 individual cases. With this clinical activity, we have recently reached a platform milestone as our molecular data set now exceeds over 1 million profiled cases and has grown into one of the most important clinical genomic resources in the industry. As the industry evolves, the intersection of molecular science and AI is accelerating technological innovation. Our philosophy is a long-term strategic orientation to develop the best offerings on the market and to pursue this innovation, while generating profitable growth and maintaining financial strength. We've had an outstanding fourth quarter with total revenues increasing 125% year-over-year to $293 million. As demonstrated on Slide 4, this result was driven primarily by strong performance from clinical profiling. Molecular profiling services revenues increased to $282 million in the fourth quarter representing an increase of 199% year-over-year. Pharma R&D Services revenues were $10.8 million in the fourth quarter, and we're making important progress in CDx data discovery, including the December announcement of the Genentech Discovery deal as well as a CDx collaboration. In summary, across the board, we had a very productive fourth quarter illustrated by the quarter highlights on Slide 5. The strong revenue performance, combined with the operating leverage inherent in our business model has produced excellent financial results, including the following: revenue growth of 125% which was driven by volume growth of 20% and a 150% increase in clinical ASP. This revenue growth has led to significantly improved gross margins of 75% on a GAAP basis, up from 54% in the fourth quarter of 2024. It also represents a significant sequential increase from the 68% in the third quarter. With this gross margin improvement, this quarter, we generated positive GAAP net income of $82 million and adjusted EBITDA of $106 million as well as positive free cash flow of $39.7 million. This is our third straight quarter of positive adjusted EBITDA and positive free cash flow. This strong profitability profile is unique in our industry and provides valuable strategic flexibility for ongoing investment in our tech platform for new products as well as the ability to develop new channels such as MCED. In addition, our balance sheet continues to strengthen with cash on hand growing to slightly above $800 million, an increase of $43 million in the quarter. The Caris data set has continued to grow with our clinical profiling activity and now exceeds 1 million genomic profiles and 740,000 match profiles. Since every profile has been generated with our WES, WTS technology for many years, our data set now features 627,000 exomes and 678,000 transcriptomes. This gives our data set tremendous power for internal product development as well as attractiveness as a research partner for academic medical centers through the POA as well as for biopharma. As the results demonstrate, our financial performance gives us unique strategic flexibility, and we intend to use that edge in 2026 to make significant investments in both the Early Detection business and our Therapy Selection channel. In Early Detection, we expect to realize the long-standing vision of our CEO, David Halbert, of launching a revolutionary Cancer Early Detection Test. Caris Detect has the potential to bend the cancer mortality curve and ultimately make cancer a curable disease. We believe that the implications for this test are truly profound, both for Caris and for our society. In our core Therapy Selection business, we plan to invest in our commercial channel to broaden our reach and deepen our relationships to accelerate growth. We have a new Chief Commercial Officer Bobby Hill, who took on this responsibility in the fourth quarter. We're extremely excited about the opportunities we face and the new initiatives that Bobby is driving, ranging from the expansion of the sales force and territories to enhance programming and education. Finally, we will make these investments while maintaining positive adjusted EBITDA and free cash flow. Our strategy is to maintain financial discipline through a strong balance sheet and profitability, and these financial pillars of strength will allow us to realize our mission of making precision medicine a reality to benefit patients and physicians. I will now turn the presentation over to Bobby Hill to provide an update on our commercial business and related strategic initiatives.

Thanks, Brian. I will provide a brief update on our molecular profiling business along with our initiatives for the commercial teams in 2026. Starting on Slide 6, this shows our strong molecular profiling revenue performance for the full year, with revenues increasing 120% to $766.7 million. This excellent revenue growth was driven by a 22% year-over-year growth in clinical case volumes to approximately 199,300 profiles and a 79% increase in average sales price, reflecting our market access and billing team's strong execution throughout 2025. This average sales price growth was driven by our successful launch of MI Cancer Seek on January 1 of last year. The benefits are reflected on the slide, where tissue average sales price increased by 83% to over $4,000 and our blood average sales price increased by 69% to just under $2,800, driven by billing our new PLA code and improved payment for Caris Assure. Luke will discuss the breakdown of this further during the financial update, along with the trends we observed in 2025. This illustrates the growth that our sales team has achieved in clinical profiling this year, which I find encouraging as we see progress into 2026 already. Our Q4 growth was 20%, showing sequential improvement from 18% in Q3 2025, with Caris Assure delivering 59% year-over-year growth in Q4 2025 and continuing to gain traction. Entering 2026, to broaden our reach and deepen our relationships to accelerate growth, we are continuing to invest in our commercial channel by expanding the sales force, including growing our Liquid Specialist Team to maximize the impact of our excellent teams. We will also strengthen our product and value proposition messaging by focusing on the key differentiation of our technology and the clinical impact that advanced technology has on patient care, as evidenced by data publication, scientific literature, and enhancing medical education and training across both our customers and internal teams. We are now consistently reaching over 6,000 oncologists across the country and have EHR integrations at approximately 3,100 clinical sites, with around 75% of our orders coming in electronically. This will be another area where we will continue to invest from both a customer and team standpoint to streamline the ordering process. I joined Caris because of our scientific and technological differentiation and our forward-thinking development of solutions, and I'm excited about continuing to expand the Caris commercial reach to help more patients as we go through 2026. I will now turn the presentation over to Dr. Spetzler to discuss our progress on our product pipeline, particularly regarding Caris Detect.

Thanks, Bobby. We are pleased to share our ACHIEVE-1 interim results today, which are detailed on Slide 8. This study is aimed at supporting the upcoming launch of Caris Detect, our blood test based on whole genome sequencing set to launch in the second quarter of 2026. The significance of ACHIEVE-1 lies in our commitment to prioritizing patients, which means our development decisions are not constrained by cost and we aim to create the highest-performing test possible. This approach has brought success with our therapy selection assays, which are the most comprehensive available as we perform whole exome and whole transcriptome sequencing on every eligible patient sample. We are adopting the same methodology for early cancer detection. The interim findings highlight the advantages of our approach, as we sequence at remarkable depths across the entire genome. We believe that cancer is essentially driven by molecular abnormalities that manifest in various stages, including driver mutations, epigenomic changes, transcriptomic changes, and aneuploidy. While many blood-based early detection methods focus primarily on epigenomics, we take a wider biological perspective by using ultra-deep whole genome sequencing to capture as many genomic alterations as possible. This richer data set enhances our performance and reinforces our belief that a limited biological focus is inadequate to capture the complexity of cancer. Caris Detect is also distinguished by the foundation it is built on. The test utilizes Caris' extensive molecular profiling data, which has now exceeded 1 million cases and comprises over 50 billion molecular markers. This vast scale and depth enable our AI models to detect subtle biological signals linked to early-stage cancers with exceptional resolution using the whole genome. The interim results include a total of 2,122 samples, comprising 617 cancer cases in stages 1 through 4, and 1,505 patients who had no known cancer at the time of the blood draw. It's important to note that these control samples are from individuals with screening or symptoms, which indicates a higher likelihood of cancer compared to the general population. We have at least one year of follow-up data on 22.5% of the normal cohort, with 35% identified as our asymptomatic screening population, which includes 121 individuals with no significant cancer risk factors, and at least one year of follow-up post-blood draw. Notably, 7% of patients in the total cohort were later diagnosed with cancer, confirming that our control group is genuinely high risk. Now, onto the results. The interim readout shows strong sensitivity that increases with stage, coupled with high specificity. Sensitivity for Stage I is 56.8% with 266 patients, 70.1% for Stage II with 137 patients, 77% for Stage III with 105 patients, and 99.1% for Stage IV with 109 patients. The sensitivity for Stage I and II combined is 63.1%. We also analyzed the sensitivity by lineage across various cancers, with breast cancer showing 53% sensitivity across 253 patients, 62.2% for valves with 45 patients, 78.9% for prostate with 38 patients, 73.7% for uterus with 19 patients, 86.7% for lung with 15 patients, 71.4% for pancreas with 7 patients, and 100% for head and neck cancer with 7 patients. Regarding specificity, we tracked 22.5% of patients for about three years following their blood draw, revealing 99.1% specificity in the screening population, where follow-up data is available for 121 patients who showed no cancer symptoms, no cancer history, and no family cancer history, and were not subsequently diagnosed within two years. In the higher-risk normal population of 1,505 patients, we found 95.3% specificity, with roughly 7% later diagnosed with cancer, demonstrating that our enrollment criteria effectively target high-risk individuals. Overall, our model performance, as measured by AUC, stands at 0.90. These are interim results that we are very excited about. ACHIEVE-1 also includes a blinded validation cohort of about 865 samples that have been set aside for independent testing, which is currently underway and we anticipate supporting these results in the first quarter. Simultaneously, we have begun processing samples for ACHIEVE-2, which is the next phase of our program. To summarize, the ACHIEVE-1 interim results indicate robust performance, with Stage I and II sensitivity at 63.1%, high specificity, and an AUC of 0.9 across a broad dataset covering 35 cancer types with no cancer types assisting the results. We view this as a significant milestone as we progress towards the blinded holdout readout, which will be the next critical catalyst. Now, moving to Slide 10, which highlights the status of our strong pipeline. Before I let Luke discuss the financials, I will briefly cover our offerings. First, Caris MI Cancer Seek is our whole genome and full transcriptome service aimed at therapy selection in hematological malignancies, specifically AML, MDS, MPN, and selected cases of suspected myeloid malignancies where cytopenias persist and other causes have been eliminated. Similar to what I mentioned about early detection, here too, depth and breadth are crucial. We achieve more than 200x coverage in whole genome sequencing and the assay is engineered to detect a wide range of clinically significant genomic alterations, including mutations, fusions, copy number variations, expression, and aneuploidy, generating approximately 1.6 billion reads per patient. We have responded to MoIDX feedback regarding our TA submission and will move forward with the launch once coverage and pricing are finalized. Next is Caris MI Clarity, designed for breast cancer patients who are ER-positive and HER2-negative, generally in stages I or II, and may include patients with 1 to 3 positive nodes, particularly among post-menopausal patients. This solution offers two alternatives: one that combines the MI Profound Platform with digital AI, and another featuring only digital AI. Both aim to enhance treatment decision-making and minimize unnecessary treatments while identifying patients who genuinely require therapy. From an operational standpoint, we are currently planning the launch and pursuing reimbursement through two channels: the NGS plus digital AI and the digital-only option. We expect that the digital-only path will be the quicker route and likely be the first version we launch. Notably, both variations of MI Clarity outperform existing offerings. The third offering is Caris MRD Tumor-Naive, initially intended for colorectal cancer. Its clinical goal is to assess minimal residual disease in patients with Stage II and III solid tumors following curative intent treatment, helping to guide decisions regarding adjuvant therapy. Importantly, this test can be performed using whole blood samples without needing an individualized tumor-informed assay. As previously discussed, MolDX has requested additional data, and we are in the process of compiling that information and will provide updates as we move forward. There is also Caris MRD Tumor-Informed, which utilizes our whole genome approach for pan-tumor applications in Stage I, II, and III diseases. This method is based on tumor-normal whole genome sequencing to pinpoint patient-specific markers with a proprietary technique aimed at reducing false negatives. Our strategy focuses on maximizing tracker counts and achieving ultra-low PPM detection capability, as high sensitivity at very low levels is crucial for MRD. We have begun the development and planning for this launch and will keep you informed as we advance throughout the year. Additionally, we have introduced five new AI signatures in our molecular tumor board reports, which are available to physicians as part of our MI Cancer Seek for breast, pancreatic, brain, lung, and ovarian cancers. These signatures provide insights into which patients could benefit from currently available therapies and illustrate how our whole exome and whole transcriptome strategy offers the most effective therapeutic guidance, showing that profiling is becoming more proprietary rather than commoditized. Simple panels of hundreds of genes are inadequate for providing these insights. As Brian highlighted in our investment strategy, our aim this year is to accelerate all pipeline activities to bring these comprehensive solutions to improve patient lives. I will stop here and hand it over to Luke for the financial updates.

Thanks, David. As Brian stated earlier, we had another outstanding quarter in terms of financial performance. So I'll run through some selected highlights prior to getting to the 2026 guidance. Turning to the financial overview slide. You can see we delivered another great quarter and finished our first year-end as a public company very strong, with total revenue increasing 97% for the full year, reflecting exceptional organic performance across the business. As part of this, you will notice that our final revenue numbers for Q4 and the year is about $12 million higher than our preliminary January numbers. And this is the result of seeing continued positive collections from payers. So we adjusted our crude ASP rates in Q4 of '25 to account for these additional collections. The main driver of our 2025 growth, as expected, was our Molecular Profiling business, which grew 120% compared to 2024, due to this ASP upset along with the volume growth. Our therapy selection volumes were up 20% for the quarter and 22% year-over-year, slightly above our expectations and an improvement from the Q3 growth rate of 18% that Bobby mentioned. As discussed publicly, in January, while our pharma revenue was down year-over-year, we were happy with how it finished with our target discovery announcement with Genentech and fully expect to continue to build on that momentum into 2026. As we start to recognize revenue from that deal along with continuing to build on the contracting pipeline. Overall, our revenue growth and financial performance continues to show up on the bottom line, with positive adjusted EBITDA and positive free cash flow, not just for the quarter, but with positive adjusted EBITDA of $138 million and positive free cash flow of $67 million for the full year of 2025 and as Brian mentioned, we ended the year with over $800 million of cash on hand. 2025 was a superb year in terms of Molecular Profiling services. As you will see on Slide 12. We took a measured approach as we entered the year in terms of stepping up our ASPs from the FDA approval of the MI Cancer Seek solution, and I'm delighted to say that after the maturity after 12 months, it has demonstrated real sustainable uptick with payers' appreciating the comprehensive approach of our solutions and the signatures that are also included as part of the offering, one of which we press released on Tuesday. As reflected on the slide, the favorable payer response led to additional revenue exceeding prior accruals with the majority of the additional revenue related to cases performed in 2025 and only $33.6 million being related to benefit from 2024 and prior year cases. This has resulted in us being able to reach an ASP for our 2025 cases of $3,876 per tissue and just above $2,500 for our blood assay. These improvements are due to various tailwinds we have seen occurred throughout 2025 and for which we expect to continue to benefit from in 2026, and we have listed some of these on the next slide along with the positive trend in Molecular Profiling gross margin. The key driver for tissue was obviously the impact from our FDA approval and the subsequent increase in pricing and the benefits we saw through contracts, where we have now surpassed over 225 million covered lives from MI Cancer Seek. MI Cancer Seek represented greater than 70% of our tissue volume for the full year of 2025, almost over 75% of our tissue volume for Q4 and we're able to increase our tissue growth rate for the full year to over 16%, which was up from the 2024 growth rate. For Caris Assure our PLA accrual was effective for the full year in 2025 and payers responded when we discussed both solutions together, and this played out in the reimbursement uptake over the past year. We've also seen a steady improvement each quarter as we continue to gain traction in volume, with Q4 reflecting a 13% sequential growth from Q3 of 2025. With regards to our Medicare ASP, as you know, our solutions went through clinical lab fee schedule pricing of CDLT and not ADLT. Accordingly, they are subject to the PAMA CDLT reporting process, which is on a 3-year cycle. As part of the recent Consolidated Corporations Act PAMA was amended so that the next reporting period is from January 1 to June 30 of 2025. And based on the initial view of our data, we do not expect any downward adjustments to MI Cancer Seek and Caris Assure through 2029. Staying on the same slide, the improved reimbursement had a very positive impact on the Molecular Profiling gross margin for the year as demonstrated by the progression seen on the graph. We finished at 66% GAAP gross margin for the full year. And even excluding the additional revenue from exceeding accruals for prior year cases, this was only slightly below that at 64%. This improved gross margin allows us to continue to invest and develop comprehensive offerings, validating the long-term approach we take with our solutions. All in all, it was a fantastic year from a financial performance standpoint, demonstrating the excellent work by everyone at Caris as we wrapped up our first year-end as a public company. Now turning to the outlook for 2026, which is reflected on Slide 14. Consistent with our prior approach, we're initiating full year guidance based only on our current portfolio, and will only add the pipeline solution to our guidance once they have started to generate revenue. This allows us to take a deliberate approach with gated investment strategies to ensure that these will flow through as milestones are met throughout the year. With the 2025 results, we delivered on our goal to demonstrate that our model can be self-sufficient and generate free cash flow. And now going into 2026, our plan is to reinvest from this position of strength by continuing to progress on our differentiated pipeline along with our commercial infrastructure. Therefore, for the full year of 2026, we expect total revenue for existing solutions to be in the range of $1.0 billion to $1.02 billion, which represents growth of approximately 23% to 26% compared to 2025. On the clinical side, therapy selection volume is expected to grow approximately 20% year-over-year in 2026, reflecting continued demand expansion and broader adoption across our ordering base. And as Bobby discussed previously, we've begun making those additional investments in the commercial organization. Within the total revenue range, we expect molecular profiling to grow approximately 21% to 22% in 2026. But excluding prior year additional revenue from exceeding previous accruals, this implies a Molecular Profiling growth rate of approximately 26% to 28%. From an ASP standpoint, our focus remains on continuing to improve on commercial payer contracting as we progress into 2026. And for tissue, we're tracking towards approximately $4,000 a case which we now expect to reach in Q1, followed by continued progress throughout the year with this initial guidance reaching approximately $4,200 for the full year 2026. For blood, we expect ASP to be in the range of $2,400 to $2,500 for 2026 and will seek to further expand contracting, but any potential upside is not reflected in the guidance. With regards to Pharma and Research Revenue, we expect $75 million to $85 million for the full year of 2026. This reflects contribution from our previously announced Genentech deal, a recent companion diagnostic collaboration along with the development of contracting pipeline and our investment in additional dedicated team members for our pharma customers. As in prior years, we expect the cadence as more weighted to the second and fourth quarters, with Q1 and Q3 being lower than Q2 and Q4. On the expense side, we expect GAAP operating expenses to be in the range of $590 million to $595 million, representing an increase of approximately 19% to 20%. This increase is primarily driven by the commercial expansion of pipeline trial activities, as demonstrated by the excellent results from ACHIEVE-1 and also then including the ACHIEVE-2 study of advancement of our Assure assay development models, including our planned New York State submission. Finally, with regard to free cash flow and adjusted EBITDA, we expect to remain positive for the year while funding these investments. One additional incremental item in 2026 will be CapEx as we prepare for the early detection launch. After spending approximately $16 million in 2025, we expect CapEx in the range of approximately $60 million for 2026. This spend is tied to increased capacity and will be staged and milestone driven, so will not be applied all at once and spread throughout the year. As we have stated previously, we're not optimizing for peak margin in 2026 at the expense of long-term value, but we're committed to operating within our guardrails remaining positive free cash flow and adjusted EBITDA, while we execute on the milestone by continuing to drive our top line growth. I will wrap up there. And with that, we'll now turn the call back over to the operator.

Our first question comes from Dan Brennan of TD Cowen.

Maybe just first one, just on the volume outlook, the 20% volume growth. I don't think I've heard you, did you guys break down how that's going to break down between tissue and blood. So you can give us that color? And then did you give us any color on pacing for revenues as well? So where should the first quarter land?

Yes. So Dan, so on a total volume basis, we guided to the 20%. The 20% is broken up very similar to Q4. So lower teens for tissue and then high 50s, lower 60s for blood from a growth standpoint. And then on the revenue outlook for Q1, right now, we're in that 70% to 74% growth range for total revenue.

Okay. And then maybe as a follow-up, so Bobby is now running the sales force. You've added some headcount. So can you elaborate a little bit on like how big the sales force was previously? What was the decision to bring Bobby in? How many people are you adding? Anything on the strategy? And then have you baked in any impact from these additional salespeople, will they drive revenues and volumes this year? Or is it going to hit in the fourth quarter? How do we think about the contribution from this added head count?

Yes, yes. So I can definitely take that, and then I'll let Bobby chime in on. So effectively, Bobby joined us, obviously, to lead our reimbursement efforts, knowing that Bobby also has additional expertise that would transition into the commercial operating role in the future. So from that standpoint, Bobby, obviously, has been here kind of 1 year, 1.5 years right now and done excellent work, as you can see in our results with the reimbursement. So as we go forward and what we're planning for 2026, we announced at JPMorgan that we were about 250 salespeople, and we wanted to increase it about 20% to 25%. So get that back up to about 300 people. Again, Bobby has done great work with kind of going through the territories and see where we can get the most benefit from that. To answer your last question before I pass it to Bobby, we incorporated the expense, but we're taking a measured approach with our volume. We obviously think this is going to pay off for us in the second half of the year, but that's not incorporated in the 20% number. The 20% we were able to achieve in Q4, which was what we were expecting to go into 2026. So I definitely think once we have further experience with the uptick in salespeople and obviously, all the initiatives Bobby is implementing that you could see benefits, but we're not guiding to that right now.

Spetz, thank you for sharing the MCED interim data you provided specificity data, which delineates between asymptomatic screening and undiagnosed population. Can you further define these populations? How do they differ? And why did you do this? What is the significance from the perspective of clinical regulatory reimbursement and commercial?

In the higher-risk population, we observed a 7% rate of undiagnosed cancer. If 7% of the control samples are positive for cancer, this will result in a lower estimate of specificity compared to the general population, where the incidence rate is significantly lower. The clean cohorts with longitudinal outcome data indicating that they are healthy patients will reflect the specificity in a general healthy screening population. In contrast, the symptomatic screening population, particularly the high-risk group, aligns with what we would expect in high-risk clinics. The clinical context of the patient is crucial when interpreting the results, and we need to be clear and cautious when characterizing test performance across the different populations we plan to market to.

Very helpful. Luke, you mentioned how AI will support the pharmaceutical sector and how the database is performing. Do you have any early insights on the pharmaceutical R&D spending environment, given that the industry is increasingly interested in investing in AI, and could Caris play a beneficial role?

I definitely think we could be a beneficiary, especially from our molecular data set that now has over 1 million profiles. But from our guidance standpoint, Subbu, like the $75 million to $85 million, it's based on looking at what we've been able to do historically from a base run rate, knowing that we signed the additional Genentech deal that we publicly announced. We have a couple of CDx collaborations, one that was completed that we're not announcing publicly at the request of our pharma partner, that allows us and gives us great confidence as we go into the year in order to achieve that. But you're right, there's definitely a lot of trends, and we've had continued outreach, particularly around our data and the use of that in AI.

Congratulations on the quarter. Dan asked about volumes, so I'll address the average selling price. For tissue, if I understood correctly, you mentioned $4,000 in the first quarter, aiming for around $4,200 for the entire year. I acknowledge that there's a significant true-up for average selling prices in the third and fourth quarters, but that still seems relatively conservative compared to our previous discussions about reaching a higher range in the $4,000s. I’d like to know how much conservatism has been factored in, what your visibility is on the commercial front, and how much true-ups may add on top of that.

Yes. So the answer to true-up questions. Like we purposely launch MI Cancer Seek at the start of 2025, knowing that we'd get the full 12 months of the activity. So we could get all the kind of true-ups incorporated as much as possible in 2025. Because, again, I always take a measured approach when it comes to ASP, I'd like to see the history play out. And now that we have that, it's a good starting point as we go in and knowing that we'll get to the $4,000 based on the contracts we signed that kick in at the start of the year. I definitely think there's headroom there. But I do want to be measured again going into this year. We've done excellence on ASP. Obviously, it's the best in the industry, and it's due to the decision David Halbert made to go the whole exome and whole transcriptome like 5 years ago, and that has paid off for us. So going into it, the $4,200 is kind of where I want to guide to right now. And then we'll progress throughout the year. We'll get additional contracts, as Bobby said, and then we'll just see, Mike, where it shoots up. But from a guidance standpoint, I feel really good right now with the $4,200 for the full year.

8 years ago.

Yes.

Good point. And then for my follow-up, for the guide for this year, you kind of left it relatively open ended in terms of adjusted EBITDA positive. There's a big range to what positive means. And I think just to combine this with a commercial reinvestment point. Could you maybe talk about the puts and takes of that? How much of a lever you think that could be? And sort of how you think about that balance, right, of investing, getting maybe a little bit more on the margin side of things versus the other way around?

Yes, it's going to be pure like utilizing the leverage, Mike. So for us, obviously, we're able to generate like over $136 million of adjusted EBITDA for the full year of 2025. We're going to utilize that going in. So you obviously see the increase of $100 million in OpEx. What we're planning on doing, especially in the first half of the year is utilizing that. And I've stated on multiple calls, obviously, since we became public like the ideal goal go for me going into 2026 would be to kind of run neutral in the first half of the year just by getting these investments done. Now we'll continue to generate. We're generating, obviously, the $60-plus million of free cash flow because of the position we're in, we're going to utilize this. And again, that's why we're just guiding to being positive right now. I'm not going to throw out that it's going to be $150 million or $200 million. But if we execute, obviously, we continue to drive margin from a profitability standpoint past 2026 and into 2027. And obviously, we're very excited with the early detection launch, and that's kind of the primary focus for the first half of this year.

Maybe, Luke, my first one is on ASP assumptions here for fiscal '26. Did I hear you correct when you said blood is $2,400 to $2,500, I thought the fiscal '25 extra blood ASP was north of $2,500. So maybe just walk me through on why blood steps down and that $4,200 on the tissue side. does it contemplate the full normalization of PLA uplift on the CMS side? Or is there some more room left when you think about '27.

Yes. So answer to the blood first. I'd like to guide from a blood standpoint in the $100 range, like you're right, like the $2,500 is kind of at the top of that range is where we ended up. I definitely think there's some upside to that, as I mentioned in the pre-prepared remarks. So right now, what I would guide to is in that $2400 to $2,500 just based on the mix of cases is where we came up with that guideline because obviously, Medicare has paid better, commercials paid a little less and there's sometimes fluctuation amongst that in the quarter, especially as we ramp up our blood volume. Obviously, it's been growing quite nicely from a sequential standpoint. So that's the reason for the $2,400 to $2,500. But I'm not guiding to us like a massive step down or anything. I just want to be cautious with the guide from the blood ASP. And then on tissue, we put out the metrics that obviously, over 75% of our tissue volume is going to be under the PLA code, and we're making great progress there. But you do have the remaining 25%, that's not. So we've hit our goal that we came into the year in order to get above that kind of $3,600 for Q4 and obviously announcing that we're going to get to $4,000 for Q1. I feel good with the progress that our excellent market access team is making, along with our billing team to continue to push on that and get that to a higher rate. But now from a guidance standpoint, like the $4,200 feels really, really good right now, and that's what I want to stick with from the guidance standpoint.

Understood. Then maybe my follow-up on this step-up in OpEx spend for '26. I'm curious, when I look at the market, the market seems to be rewarding companies in the space for volume growth rate versus you guys being focused on profitable growth and that's a distinction that you made. Does this OpEx step-up signal that, hey, if the market is not rewarding Caris on profitable growth, let's put volumes. So just walk us through the rationale of this OpEx step-up where is the spend going? Is this for existing test or new test? And when you think about productivity per rep, how long did it pay for these reps, these new reps to get productive?

Yes. I'll start, and then the team can add their insights. We are definitely seeing a significant increase in operating expenses, particularly with a 30% growth in sales and marketing, which is our top priority. The second priority is in research and development, where we're also seeing a 30% increase. We're particularly excited about the ACHIEVE-2 study, and we aim to continue to advance our efforts with its data. From an R&D spending perspective, this will remain a focus. Generally, it takes about six months for sales and marketing efforts to yield results. Last year, we successfully set realistic guidance, and this year, we’re not expecting any significant volume increases in the second half. Many companies experience a ramp-up from Q1 to Q2, Q3, and Q4, which is reflected in our numbers. However, we are not counting on a substantial volume uptick until our initiatives are fully implemented. We will return to provide updates on our progress to the market. Brian, would you like to address the first point?

Listen, I would answer it a little more generally, which is, Vijay, I think we see a tremendous amount of opportunity in the market. It's not penetrated. Rather, we see with sites all of the time, more physicians that need the best technology. So we're extremely optimistic about the opportunities in front of us, not just with the new modalities like MCED, but just with our existing core business and therapy selection. So with our technology solutions, and we think the best technology solutions on the market, and we're super excited with Bobby's leadership to put more resources, human capital programs, et cetera, behind this to support our cancer center clients as well as individual oncologists through educational programs, the MSL teams, et cetera, et cetera, as we go through this continued evolution in molecular information. So we're just super excited. And with Bobby's leadership now, we can invest even more aggressively. So I think that's where this is coming from.

This is Colleen on for Doug. One on CapEx. We think we heard Luke mention $60 million in CapEx dedicated to the MCED launch this year. Can you just share any more color on how you plan to allocate that spend?

Yes, pretty evenly throughout the year, Colleen, maybe a little bit more weighted, so like $35 million, $25 million first half, second half of the year. It will all depend on how quickly we can get the early detection ramped up. We're working very, very quickly on that right now. One of the key items from the CapEx standpoint is, obviously, our new Assure assay is going to be switched over to the Nova X. And Nova X is also what we're using for early detection. So there's going to be additional Nova X machines that we'll purchase as well throughout the first half of this year and that we've already ordered. So that's kind of how it's broken up. It's a lot related to testing equipment and then additional spend related to capacity and buildings. No. I think, look, we're always being very strategic in what we do. We have a great assay in-house. And obviously, we always focus on the technology first at Caris. So that's going to be a primary thing. But we remain strategic and obviously, the flexibility that we have based on our financial performance and the cash on hand, gives us an opportunity to just continue to assess. But we're going to push on all fronts, and then we'll see what actually shakes out.

Great. This is Sebastian on for Casey. Can you talk a little more about expectations for volume pacing? It sounds like you're not making any impact from new reps. I think you talked about mid-teens growth-ish for tissue and then something in the mid-30s for blood. Would you expect to grow above that in the first half and then below in the back half, pending your ramp from new reps? And then just what's your expectation there for 1Q? And I have a quick follow-up.

Yes, Sebastian. You may have mixed that up. We are continuing to increase our efforts. When Dan asked, I mentioned that tissue growth is expected to be in the low teens, consistent with our Q4 results, while blood is anticipated to be in the high 50s, specifically 59% for Q4. That is what we are factoring into our guidance. For Q1, based on our historical performance, there tends to be a slight push between Q1 and Q3, and then a bump in Q2 and Q4. This pattern has been consistent in our financials due to schedules, holidays, and other factors. However, as we move into the second half of the year, I am very optimistic about achieving that 20% growth for the year overall.

So yes, as you noted, the performance in breast is really, really good. And compared to like methylation-based tests that have single-digit sensitivities in early stage that shows a lot. But for us to go breast-only kind of creates an ethical quandary because we wouldn't want to not report out when we find other cancers there. So the performance is really strong. And one of the reasons why the numbers are lower in some of those other categories is because not a lot of patients are found at early stage because there are no existing screening modalities that are very effective. And so we'll see that continue to play out over time where with our technology and our test, we will be the ones finding those early-stage cancers. And so those numbers will go up simply because we're now able to find them at the early stage.

Probably one for Luke. I think a little bit of a follow-up there. I just wanted to talk through what's baked into the guide for the new hires. How are you thinking about the pacing of hiring, how quickly they become productive and then is there anything for MCED in the numbers? Just wanted to talk through that.

Yes. So on the new hires, Patrick, effectively, we're trying to get everything done in the first half of the year, getting them hard as quickly as possible. So that's baked into kind of those ...

Yes. We have already posted all the positions we plan to fill in the first phase and have started hiring for four positions that have been posted for 2026. We made this decision and informed our team on January 6. As we ramp up these new hires, we will also increase hiring for MCED as a field-based sales force, following our partnership announcement with Everlywell in January. We are implementing a multichannel strategy to address both markets. Additionally, we have updated our training to enhance how we onboard new staff to assist physicians and patients with comprehensive genomic profiling and to prepare for our upcoming launches.

We need to gather more data, and this includes the development of clinical outcome data. Therefore, we are not providing any specific timeline for this. We simply need to continue collecting samples and outcome data.

Congratulations on a strong 2025. I wanted to follow up on the MCED commentary. It's interesting that you mentioned planning to establish a sales force for the MCED opportunity. By the end of 2026 or 2027, can you provide some insight into the size you are aiming for? I know Guardant currently has about 300 and plans to expand to 600. I'm curious if you could share an idea of the size you intend to have in comparison to your partners like Everlywell.

Yes, I think that's a good question. As Luke mentioned, we will take a measured approach in building our MCED salesforce. We will start small and focus our targeting. We've already had some collaboration discussions, and we will proceed cautiously throughout the year as we assess capacity and move through the launch.

So ACHIEVE-2 will be 25,000 total. A big part of that are precancerous components. So we'd really like to be able to characterize the performance of our test in patients that have polyps, for example. And that will be a big part of that cohort. We still need to enroll probably 8,000 or so patients in order to hit that final number. But the flip side of that means that we have about 18,000 samples in-house now that we can start running. So just like we did with ACHIEVE-1, we'll issue interim results as we get them and characterize that performance in these populations of patients where there's an opportunity to act before it turns into cancer. That's going to help bend that mortality curve massively. Yes. We're going to launch when we have the final readout on ACHIEVE-1. So ACHIEVE-1 is our final accuracy study that will enable launch.

Congratulations on a successful year. Regarding Caris Detect, I was attempting to calculate the positive predictive value and some other metrics, but it seems challenging. The data looks promising, so could you provide additional clarity? I understand it's interim data, but still, how does this support the $3,500 price point? What feedback have you received from companies like Everlywell? Additionally, how do you foresee a reduction in cost of goods sold over time? I'm not sure if you've discussed that previously.

Yes. You can't really calculate the positive predictive value because it's still a case control study, with about one-third of the participants being cancer patients and two-thirds being controls. The positive predictive value depends on the patient population and the incidence rate. In this high-risk setting, having a 7% undiagnosed cancer rate is quite significant and reflects the enrichment we've achieved. You can use that 7% to help inform the positive predictive value calculation if you wish. Regarding the price point, we believe that $3,500 is relatively reasonable, especially considering that this test is effective and no other tests currently available can detect early-stage cancers. We are introducing a new technology that comes with a higher cost because it performs exceptionally well. Ultimately, this is about the decline of less effective technologies like methylation and the rise of more advanced technologies such as full genome sequencing.

It makes sense regarding the PPV and the case control. Lastly, perhaps for Luke, can you explain the lack of EBITDA guidance? It seems reasonable, but if we consider the true-ups for 2025, there may be a few million in adjusted EBITDA. Why not provide a more specific range for this year? Will this be related to MCED investment or other pipeline expenditures?

Yes. It's going to be all of the above effectively because we have a huge opportunity, not just with obviously ACHIEVE-1, we're so excited about an early detection, which is going to be massive, but also just because we're able to prove the profitability thesis, we want to utilize that going in. So like you brought up the point of like 2025, like we had $136 million adjusted EBITDA. Even if you exclude the prior year stuff, it's still above $100 million adjusted EBITDA. So I want to utilize that as we go into 2026, and that's kind of our focus. Now we are going to be diligent with that. We're not going to start burning like $250 million a year because we're in the position that we're in. But we're in a great position, and we're just going to use that. So I don't want to get tied down with guiding each quarter to a profitability metric.

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