Good afternoon, everyone, and welcome to the CARIS Life Sciences Q1 2026 Earnings Call. My name is Stephen, and I will be your coordinator today. 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 it over to Russ Denton at Keras. Please go ahead.

Earlier today, Keras Life Sciences released financial results for the quarter ended March 31, 2026. Joining from Keras today are David Dean Halbert, our founder, chairman, and CEO. David Spetzler, our president, EVP. Bobby Hill, our chief commercial officer. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the media and 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 annual report on Form 10-K filed with the SEC. Except as required by law, CARES 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. The reconciliation of these non-GAAP financial measures, the most directly comparable GAAP financial measures, are available in the press release CARES issued today. A copy of today's presentation materials can be found on our Investor Relations website. I will now turn the call over to Brian.

Thanks, Ross, and thank you all for joining our first quarter of 2026 earnings call. This is a strong start to the year and we're pleased to report continued growth, profitability, and cash generation, which will continue to support our investment strategy focused on MSED launch, the broader product pipeline, and commercial platform expanded. On slide 3, our platform continues to expand across technology, scale, and commercial breadth. We're now supporting more than 62,800 cases, up 15% year-over-year. We're very excited about the initiatives that our CCO Bobby Hill is driving, and we began to see the benefits of these in February and March. Our data set has surpassed 1.07 million profile cases, including more than 677,000 whole exomes, 728,000 whole transcriptomes, and roughly 790,000 matched profiles. We also reached another important milestone with the recent edition of the 100th Precision Oncology Alliance member, UC San Francisco. We've launched two exciting products, Cares ChromaSeq and Cares MI Clarity. ChromaSeq is a therapy selection assay for hematological cancers which expands the breadth of our offerings and features a cutting edge whole genome technology. ChromaSeq was launched on April 1st. In addition, we launched Cares MI Clarity designed to deliver insight into both early and late-distant recurrence risk for breast cancer via digital pathology, multi-cancer early detection, and we're getting ready for commercial launch with plans to add additional orientation to develop the best offerings on the market and to pursue this innovation while generating profitable growth and maintaining financial strength. We had a strong first quarter with total revenues increasing 79% year-over-year to $216 million. This result was driven primarily by strong performance from clinical profiling. Molecular profiling services revenues increased to $211 million in the first quarter, representing an increase of 85% year-over-year. We had a very strong revenue performance combined with the operating leverage inherent in our business model has produced continued positive financial results while we ramp up investments. 79% and a 61% increase in clinical on a gap basis, up from 47% in the first quarter last year. We've invested significantly this quarter while maintaining financial discipline. This approach has produced positive adjusted EBITDA of $26 million, as well as positive free cash flow of $22.5 million. Positive adjusted EBITDA and positive free cash flow provides us with valuable strategic flexibility for ongoing investment in our tech platform for new products, as well as the ability to develop. our balance sheet continues to strengthen with cash on hand growing to slightly above 825 million dollars an increase of 23.4 million dollars in the quarter. Finally as a result of this profitability profile we were able to attractively refinance our credit facility. The new 400 million dollar debt facility led by Blue Owl and Blackstone offers many advantages. Lower cost or million dollars on the service gives us unique support in our investment program in the first quarter. We're continuing to invest in our product pipeline, importantly, in our MSED business, which Dr. Spessler will describe in detail, as well as the expansion plan. Commercial channel is highly differentiated and has many strategic edges. We're committing new resources to expand the commercial footprint with important hires across the platform, expanding the number of territories covered, and building product revenue.

At this time, we will conduct the question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by. We will compile the Q&A roster. Our first question comes from the line of Michael Ryskin of Bank of America. Your line is now open.

Hi, this is Alexa Chen on the mic. Thank you so much for taking our questions. I just have a couple ones here. Maybe to start, can you talk about the impact that the sales realignment might have had on tissue volumes this quarter. And then as a follow-up, can you discuss your confidence in achieving the 20% volume growth target for the year, given the softer start? And we appreciate that the sales force has realigned and that trend's improved in February and March, but it still appears to require a significant ramp from here. Thank you.

Yeah, as we, as any time when you realign a sales organization and put them into new territories we saw a little bit you know slower start to the very beginning of the year. Beginning of the year sometimes is slower so that's why we chose to do it then but what we saw each month after that and what we and what we're trending at we feel confident that we're going to achieve 20% year-over-year by the year.

Yes and one of the reasons why we also disclosed kind of that the exit rate on the completions for February and March is what also gives us confidence. You can see based on those numbers, like we've improved dramatically on the tissue front from where we were running on a monthly rate last year, but over $15,500 for kind of on average from February and March. So we believe that continued trend is going to benefit us as we go into Q2. So we feel good about the low teens guidance.

Great. Thank you so much.

Thank you. Our next question comes from the line of William Ruby of TD Cowan. Your line is now open.

First question is just on the clinical volumes in the first quarter, did weather hold back to clinical volumes at all? And if so, by how much?

No, we've gotten the cases in the door, so what we expect to happen and the reason why we're reaffirming that guide from a volume standpoint is what you'll see now is an improvement in the sequential growth from Q1 to Q2 that we were initially expecting kind of a 7% growth sequentially from Q1 to Q2. Now that's going to be cases will flow through in the second quarter, and it'll be caught up by the end of the second quarter as we progress.

Got it. And then if you could just discuss kind of the traction in blood testing, what's been the strategy and the impact, and where you have the most type of success and types of And just on that, please.

Yes. We've expanded, before Q1, our liquid product specialist team, a bunch of individuals that are highly skilled at helping blood testing. We saw 135% growth in their targets quarter over quarter and because of that quarter, we're going to double the size of that team again in Q2. Tissue profiling was our base business and now we're getting good at selling blood profiles for the right patients and we'll continue to do that.

We submitted to New York States significantly increases the amount of RNA profiling that we're doing going up to about 600 million reads from thank you appreciate it thank you our next question comes from the line of Vijay Kumar of Evercore the line is now open hi guys thank you for taking my question maybe maybe first one on a big picture question if you will think Luke you brought up the crush initiative you You know, space has been under pressure. You know, investors are nervous about reimbursement in the space. The stock is high level. Is there a risk to the space on the reimbursement front? And if so, how is CARES differentiated from others' peers in the space when it comes to reimbursement?

Yeah, it's the reason why we wanted to call it out, the CDLT process. So our codes are like CDLT, not ADLT. We submitted our PAMA timeframe. So, BJ, we feel good about it. We feel really good about our pricing. As I said, we don't expect any downward adjustment. As the initiatives, we're supportive of CRUSH. We believe that we're pretty set.

Just to be clear, Luke, on that point, are you trying to make a distinction between CDLT and ADLT, and maybe CDLT is having more visibility on the pricing element if there's any rest of the space?

Yeah, I think how we price both My Cancer Seek's PLA code and Care Assurer's PLA code to not go through the ADLT path, my cancer seeks, and care is assured because we did not do ADLT on May 1st, I'm going to feel very good.

That's helpful. Then maybe, Luke, one on the guidance comment you made here on Q&Q, 10%. Was it a volume comment or a revenue comment? And if you could just clarify, what was true ups in Q1? What was underlying gross margin, sex true ups, and how should we think of a gross margin progression?

Yeah, gross margin came in exactly in line with what our expectations was in the kind of mid-60s. Focus right now this year is more on the investment. As we progress into later on this year and into next year, we'll start focusing more on improving the margin standpoint. So generally, it came right in line with what our expectations continue to have success. We continue to have that.

And the 10% worth of volume of revenues?

We're thinking about it. is down point the cases came in the door in q1 but it'll be completed in q2 so what our expectation is now for q2 is over 58 000 cases which would be at 10 percent so thank you thank you our next question comes from the line of subunambi of guggenheim your line is now open hi this is ricky on for subu thank you for taking our question um maybe one

for bobby you ended the quarter with i think it said over 270 sales reps and And earlier in the year, you said you would increase headcount by 20% to 25%. So it sounds like you still have more reps left to hire. Could you give us some color on how that hiring is progressing and also on how the 20 or so new reps that you've brought on year-to-date have been ramping up? Thank you.

Yes, we're progressing right on track of where we want to be. We changed territories and made them smaller. So we went from 82 to 146 territories. We'll continue to grow. first wave hired. We're sending them through training. They're already out making approximately 300 number.

Our next question comes from the line of Casey Woodring of JPMorgan. Your line is now open.

Hello. This is Martha's run by on for Casey. Thank you for taking my question. I apologize if I missed this, but how should we think about 2Q volumes for tissue and blood? Any color you can share there? And then also on the pharma R&D revenues. And then another one would be on the initial MSET test uptake. Are you assuming any contribution this year?

I can definitely take that. So as we just kind of just stated, our expectation is for a 10% sequential improvement from Q1 to Q2 in volume, that would get you above 58,000 cases in the quarter. And then from a blood and tissue standpoint, you will see those tissue cases flow into Q2. So we would expect to be in the 47 points approaching over the 10 and a 32 for Q2 that we're progressing along very nicely. And then I'll assess that as we get into the Q2 earnings and what the contribution is going to be for the second.

Thank you. Our next question comes from a line of Patrick Donnelly of Citi. Your line is now open.

Hey, this is Everhu on for Patrick here. Thanks for the 2Q color. I'm just curious on on the profitability side for both 2Q and for the year. I think you previously had noted a certain rain, a certain cap for the EBITDA profitability, and it's been since updated to positive. But just curious what you can share with us on both the EBITDA assumption for 2Q and then for the full year. I know you have some investments in there, and maybe perhaps share with us what those are as well.

Yeah, so from an EBITDA standpoint and from a free cash flow standpoint, I'll repeat what I kind of stated on the last earnings call. We're going to utilize the kind of financial profile we have, so we're going to get that pretty close to neutral from a free cash flow standpoint in Q2. One of the key things that we're going to push on is with the early detection launch, there's going to be an increase in Q2 from a CapEx standpoint. we're expecting about 30 million of capex of property and equipment purchases. Again, that includes the NovaSeq Xs that we're ramping up. We've also started to ramp up from an inventory purchase standpoint ahead of the detection launch. So you're going to have additional spend from that standpoint. So our goal going into Q2 is to utilize obviously the free cash flow that we're generating to fund along with pushing obviously MyClarity and Paris ChromaSeq as well.

Then from an EBITDA standpoint a key focus for us is activities that bobby is putting in place that's super helpful and just one more on well first congrats on the pipeline coming out on here it's great to see launches and reimbursement coming through and just curious on the mrd front i think you mentioned on the update uh on the prepared remarks that it's still in prepared for being launch i'm just curious what that priority is um mrd exactly what is that priority in the pipeline for you guys is that something that you know you guys are putting emphasis on and aiming to launch perhaps late this year sometime next year or or what what can you share with us on the mrd and timeline front please thank you now that we have these other product launches done and behind us

MRD is the next thing on that, quite helpful.

Okay, perfect. Thanks so much. I'll hop back in with you.

Thank you. Our next question comes from the line of Mark Massaro of BTIG. Your line is now open.

Hey, guys. Thank you for taking the questions. I wanted to start on a pipeline question. Now that you have Moldex approval for ChromoSeq and it's launched, can you speak to the unmet I think oftentimes there's a whole lot of conversation about solid tumor profiling, but can you just sort of speak to the unmet need in myeloid?

Sure. So what happens today is that those patients get a whole lot of small panel tests, a combination of different tests, and they often need to pick up resistance components. And so with our approach, we're able to, when that therapy is no longer effective. So it's a truly comprehensive approach to hematological malignancies, and not the hot blanket patients they would get with testing with multiple different tests.

Okay, that's helpful. I know that breast cancer is one of the important indications in your early detection initiatives. Can you just speak to that disease state relative to others? How should we think about the landscape progressing over time as you guys think about screening for various cancer types?

Yeah, so, I mean, breast cancer makes sure that we're servicing that patient population really, really well. The D1 is already coming right now.

Thanks so much.

Thank you. Our next question comes from the line of Evie Kozoloski of Goldman Sachs. Your line is now open.

Hi, thanks for taking my questions. So I wanted to ask on the quarterly run rate you gave for February and March of 56,000 tests relative to the 52.8 you reported for the quarter. I think you said that was up 20% year-over-year relative to February and March last year. I guess, could you talk through the split between tissue and blood and then how durable you think the acceleration in volumes is post the Salesforce realignment? And was there a level of pent-up demand in the latter half of the quarter?

February and March. So we saw ramp-ups in both products. As we look at that volume, as Luke had discussed, going into Q2, we still feel very confident that we'll be able to achieve the numbers that we've set forth for guidance, and we expect both products to continue their growth.

And then any update on the M&A and kind of capital allocation strategy? I mean, I know there's a focus kind of to reinvest more organically, but any specific areas or gaps in your portfolio that you would look to fill in organically?

Evie, hey, it's Brian. I don't – there's no gaps. And, you know, we've been a pioneer technology platform, so there's nothing in particular that we think we need. On the other hand, you know, we're very strong with respect to our financial profile. Our new debt facility gives us additional flexibility, so we're definitely in a position of being flexible.

Great. Thank you.

Thank you. Our next question comes from the line of Tycho Peterson of Jeffries. Your line is now open.

Hey, Tim. This is Noah on for Tycho. Thanks for taking our questions. I wanted to start by asking about the pharma R&D business. I think it came in a few million dollars light of consensus expectations on revenue. How are you thinking about the commercial investment in that business? Can you speak to orders or backlog performance that justifies maintaining the guide here?

Yeah, so as we kind of stated on the last earnings call, you always have Q1 and Q3 are always kind of the lower quarters from a pharma standpoint. It's just a natural cadence that we progress through throughout the year. So the revenue, the reason why we're maintaining the guidance is that revenue delta from the Q1 expectation, it's based on contracts we already have under contract. So the Genentech deal that we publicly disclosed, there was revenue dollars that moved from Q1 that will flow into Q2. And the same with some of our data partners that we have under contract that will deliver that data in the next quarter or two. So we feel good about that and we do expect from a Q2 standpoint to obviously see the that increase that we've seen over the last couple of years, where Q1 is always lowering, Q2 wraps up, Q3 comes down, and Q4…

That's helpful. And I wanted to ask one more. I know a competitor had a recent study that went to ODAC for liquid biopsy-informed drug trial that ODAC voted against. How are you thinking about implications for serialized liquid biopsy testing? And do you have any embedded assumptions for liquid testing, tests per patient expanding in the long run?

I mean, that was really more about one specific mutation, not liquid in general. There's still incredible clinical utility of liquid profile. SR1 targeted agent wasn't approved, doesn't really impact the broader utility of .

Thank you. Our final question comes from the line of Kyle Mikson of Kennecord Genuity. Your line is now open.

This is for Kyle Mikson. Thank you for taking your questions. So congratulations again on the ChromaSeq approval and launch. Just to kind of tap into that again, what is the rate that you got for this test, and from like a dollars and cents perspective, what is the addressable market we're looking So the rate is $3,228 is what we got from MoldeX.

From a market standpoint, there are about 50,000 patients that made three indications that are set forth in the MoldeX that we believe that when we coverage on because of the depth Got it.

Just one more for me. You spoke to the expansion of your Precision Oncology Alliance on this call, for which you plan to host your summit on the eve of the ASCO conference. On ASCO, can you elaborate what types of data you'll be presenting for pipeline and recently launched products, including MSED and MRD, among others?

We have a lot of data that we'll be presenting.

Got it.

Thank you.

This does conclude the Q&A session and the program. I'd like to thank you for your participation. You may now disconnect.