Veracyte Announces Third Quarter 2024 Financial Results

November 7, 2024 |

20 min read

Grew total revenue to $115.9 million, an increase of 29%

Grew testing revenue to $109.5 million, an increase of 34%

Conference call and webcast today at 4:30 p.m. ET

SOUTH SAN FRANCISCO, Calif.--(BUSINESS WIRE)--Veracyte, Inc. (Nasdaq: VCYT) today announced financial results for the third quarter ended September 30, 2024.

“The strong momentum across our testing business continued during the third quarter as we delivered record revenue along with profitability and cash generation,” said Marc Stapley, Veracyte’s chief executive officer. “Looking ahead, we see tremendous opportunities for further market penetration for both Decipher and Afirma, to serve even more patients and their physicians. We also remain excited about our focused portfolio of strategic growth drivers. The Veracyte Diagnostics Platform is generating the data, insights and evidence to drive commercial success and sustained long-term growth.”

Key Financial Highlights

Increased third quarter total revenue by 29%, to $115.9 million, and total volume by 20%, to 39,032 tests, compared to the third quarter of 2023.
Increased testing revenue by 34%, to $109.5 million, and testing volume by 24%, to 36,792 tests, compared to the third quarter of 2023.
Grew Decipher revenue by 48% and volume by 36%, to approximately 21,250 tests, compared to the third quarter of 2023.
Grew Afirma revenue by 19% and volume by 12%, to close to 15,100 tests, compared to the third quarter of 2023.
Increased third quarter net income to $15.2 million and delivered adjusted EBITDA of $27.3 million, or 24% of revenue.
Generated $30.0 million of cash from operations during the third quarter to end the quarter with $274.1 million of cash and cash equivalents.

Key Business Highlights

Expanded clinical evidence for Decipher Prostate with a presentation at the European Society for Medical Oncology (ESMO) 2024 Congress on new data from the STAMPEDE trial, a multi-center, randomized, phase 3 clinical trial showing that the test was prognostic for clinical outcomes and predicted benefit from docetaxel in patients with metastatic prostate cancer.
Demonstrated Veracyte’s commitment to expanding clinical evidence in populations disproportionately impacted by prostate cancer with data from the VANDAAM study shared at ASTRO 2024, the annual meeting of the American Society for Radiation Oncology, demonstrating that Decipher Prostate accurately predicts aggressive prostate cancer among African-American men with early-stage disease.
Promoted Keith Gligorich Ph.D. to Senior Vice President of Global Operations and a member of the executive leadership team.
Appointed Tom Miller, Ph.D., and Brent Shafer to our Board of Directors.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading “Note Regarding Use of Non-GAAP Financial Measures.”

Third Quarter 2024 Financial Results

Total revenue for the third quarter of 2024 was $115.9 million, an increase of 29% compared to $90.1 million reported in the third quarter of 2023. Testing revenue was $109.5 million, an increase of 34% compared to $82.0 million in the third quarter of 2023, driven by the strong performance of our Decipher Prostate and Afirma tests. Product revenue was $3.2 million, a decrease of 21% compared to $4.0 million in the third quarter of 2023. Biopharmaceutical and other revenue was $3.1 million, a decrease of 23% compared to $4.1 million in the third quarter of 2023.

Total gross margin for the third quarter of 2024 was 68%, compared to 64% in the third quarter of 2023. Non-GAAP gross margin was 71%, compared to 70% in the third quarter of 2023.

Operating expenses were $67.0 million for the third quarter of 2024. Non-GAAP operating expenses grew 11% to $57.6 million compared to $51.8 million in the third quarter of 2023.

Net income for the third quarter of 2024 was $15.2 million, an improvement of 151% compared to the third quarter of 2023. Diluted net earnings per common share was $0.19, an improvement of $0.60 compared to the third quarter of 2023. Non-GAAP diluted net earnings per common share was $0.33, an improvement of $0.16 compared to the third quarter of 2023. Net cash provided by operating activities in the first nine months of 2024 was $50.6 million, an improvement of $21.9 million compared to the same period in 2023.

Adjusted EBITDA for the third quarter of 2024 was $27.3 million, an improvement of 117% compared to the third quarter of 2023, representing 24% of revenue compared to 14% of revenue in the same period of 2023.

2024 Financial Outlook

The company is raising full-year 2024 total revenue guidance to $442 million to $445 million, representing year-over-year growth of 22% to 23% and testing revenue growth of approximately 28%. This guidance range represents an increase compared to prior guidance of $432 million to $438 million. In addition, the company now expects cash, cash equivalents and short-term investments at the end of the year to be $280 million to $285 million compared to prior guidance of $260 million to $270 million.

Conference Call and Webcast Details

Veracyte will host a conference call and webcast today at 4:30 p.m. Eastern Time to discuss the company’s financial results and provide a general business update. The conference call will be webcast live from the company’s website and will be available via the following link: https://edge.media-server.com/mmc/p/kzh3s376. The webcast should be accessed 10 minutes prior to the conference call start time. A replay of the webcast will be available for one year following the conclusion of the live broadcast and will be accessible on the company’s website at https://investor.veracyte.com/events-presentations.

The conference call dial-in can be accessed by registering at the following link: https://register.vevent.com/register/BI945e651d9e5f40acbfaec616e1b85b4e

About Veracyte

Veracyte (Nasdaq: VCYT) is a global diagnostics company whose vision is to transform cancer care for patients all over the world. We empower clinicians with the high-value insights they need to guide and assure patients at pivotal moments in the race to diagnose and treat cancer. Our Veracyte Diagnostics Platform delivers high-performing cancer tests that are fueled by broad genomic and clinical data, deep bioinformatic and AI capabilities, and a powerful evidence-generation engine, which ultimately drives durable reimbursement and guideline inclusion for our tests, along with new insights to support continued innovation and pipeline development. For more information, please visit www.veracyte.com or follow us on LinkedIn or X (Twitter).

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to our statements related to our plans, objectives, and expectations (financial and otherwise), including with respect to 2024 financial and operating results; and our intentions with respect to our tests and products, for use in diagnosing and treating diseases, in and outside of the United States. Forward-looking statements can be identified by words such as: “appears,” “anticipate,” “intend,” “plan,” “expect,” “believe,” “should,” “may,” “will,” “enable,” “positioned,” “offers,” “designed” and similar references to future periods. Actual results may differ materially from those projected or suggested in any forward-looking statements. These statements involve risks and uncertainties, which could cause actual results to differ materially from our predictions, and include, but are not limited to: our ability to launch, commercialize and receive reimbursement for our products; our ability to execute on our business strategies relating to the C2i Genomics acquisition, integration of the business and the realization of expected benefits and synergies; our ability to demonstrate the validity and utility of our genomic tests and biopharma and other offerings; our ability to continue executing on our business plan; our ability to continue to scale our global operations and enhance our internal control environment; the impact of the war in Ukraine and other regional conflicts on European economies and our facilities in France; the impact of foreign currency fluctuations, increasing interest rates, inflation, the U.S. election and turmoil in the global banking and finance system; the ongoing conflict in the Middle East and the performance and utility of our tests in the clinical environment. Additional factors that may impact these forward-looking statements can be found under the caption “Risk Factors” in our Annual Report on Form 10-K filed on February 29, 2024, and our Quarterly Report on Form 10-Q filed for the three months ended September 30, 2024, to be filed on November 7, 2024, as well as in other documents that we may file from time to time with the Securities and Exchange Commission. Copies of these documents, when available, may be found in the Investors section of our website at investor.veracyte.com. These forward-looking statements speak only as of the date hereof and, except as required by law, we specifically disclaim any obligation to update these forward-looking statements or reasons why actual results might differ, whether as a result of new information, future events or otherwise.

Veracyte, the Veracyte logo, Decipher, C2i Genomics, and Afirma are registered trademarks of Veracyte, Inc., and its subsidiaries in the U.S. and selected countries.

Note Regarding Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release and the accompanying tables contain, and reference certain non‐GAAP results including non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA and non-GAAP earnings per share (EPS). These non-GAAP financial measures are not meant to be considered superior to or a substitute for financial measures calculated in accordance with GAAP, and investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool.

We use non-GAAP financial measures to internally evaluate and analyze financial results. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-GAAP financial measures. However, the non-GAAP financial measures we present may be different from those used by other companies.

We exclude amortization of acquired intangible assets, acquisition-related expenses relating to our acquisitions of Decipher Biosciences, HalioDx and C2i Genomics, impairment charges associated with the nCounter license and other biopharmaceutical services related to HalioDx intangible assets, all stock-based compensation and certain costs related to restructuring from our non-GAAP financial measures. Beginning in the second quarter of 2024, we changed our non-GAAP policy to exclude all stock-based compensation to align with our peers and we have also excluded all stock-based compensation from our prior period non-GAAP financial measures. Management has excluded the effects of these items in non-GAAP financial measures to help investors gain a better understanding of the core operating results and future prospects of the company, consistent with how management measures and forecasts the company’s performance, especially when comparing such results to previous periods or forecasts. The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non‐GAAP information and the reconciliation between these presentations, to more fully understand its business.


VERACYTE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share and per share amounts)

	Three Months Ended September 30,					Nine Months Ended September 30,
		2024		2023			2024		2023
Revenue:
Testing revenue	$	109,536	$	82,012		$	306,809	$	236,157
Product revenue		3,188		4,020			10,631		11,923
Biopharmaceutical and other revenue		3,136		4,076			9,692		14,772
Total revenue		115,860		90,108			327,132		262,852

Cost of revenue: (1)
Cost of testing revenue		29,029		21,827			82,928		64,808
Cost of product revenue		1,792		2,436			6,310		6,913
Cost of biopharmaceutical and other revenue		3,112		3,347			9,762		11,806
Intangible asset amortization - cost of revenue		2,917		4,811			8,741		14,429
Total cost of revenue		36,850		32,421			107,741		97,956
Gross profit		79,010		57,687			219,391		164,896
Operating expenses: (1)
Research and development		17,574		13,322			50,004		38,632
Selling and marketing		22,612		24,344			70,610		76,230
General and administrative		25,742		16,334			83,697		62,434
Impairment of long-lived assets		185		34,900			614		36,310
Intangible asset amortization - operating expenses		880		526			2,499		1,578
Total operating expenses		66,993		89,426			207,424		215,184
Income (loss) from operations		12,017		(31,739	)		11,967		(50,288	)
Other income, net		4,831		1,967			10,334		4,148
Income (loss) before income taxes		16,848		(29,772	)		22,301		(46,140	)
Income tax provision (benefit)		1,693		(154	)		3,276		(29	)
Net income (loss)	$	15,155	$	(29,618	)	$	19,025	$	(46,111	)
Earnings (loss) per share:
Basic	$	0.20	$	(0.41	)	$	0.25	$	(0.64	)
Diluted	$	0.19	$	(0.41	)	$	0.25	$	(0.64	)
Shares used to compute earnings (loss) per common share:
Basic		77,013,831		72,804,770			76,107,302		72,488,601
Diluted		78,464,654		72,804,770			77,339,897		72,488,601

1.	Cost of revenue, research and development, sales and marketing and general and administrative expenses include the following stock-based compensation related expenses:

	Three Months Ended September 30,				Nine Months Ended September 30,
		2024		2023		2024		2023
Cost of revenue	$	587	$	502	$	1,678	$	1,386
Research and development		1,957		1,135		5,615		3,831
Selling and marketing		1,790		2,521		5,025		7,126
General and administrative		4,413		3,174		14,302		13,539
Total stock-based compensation expense	$	8,747	$	7,332	$	26,620	$	25,882


VERACYTE, INC. CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited) (In thousands)

	Three Months Ended September 30,					Nine Months Ended September 30,
		2024		2023			2024		2023
Net income (loss)	$	15,155	$	(29,618	)	$	19,025	$	(46,111	)
Other comprehensive income (loss):
Change in currency translation adjustments		9,328		(6,414	)		2,736		(2,851	)

Net comprehensive income (loss)	$	24,483	$	(36,032	)	$	21,761	$	(48,962	)


VERACYTE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)

	September 30,		December 31,
		2024		2023
	(Unaudited)		(See Note 1)
Assets
Current assets:
Cash and cash equivalents	$	274,079	$	216,454
Accounts receivable		48,807		40,378
Supplies and inventory		20,364		16,128
Prepaid expenses and other current assets		13,604		12,661
Total current assets		356,854		285,621
Property, plant and equipment, net		21,194		20,584
Right-of-use assets, operating leases		17,031		10,277
Intangible assets, net		108,873		88,593
Goodwill		762,117		702,984
Restricted cash		1,080		876
Other assets		7,872		5,971
Total assets	$	1,275,021	$	1,114,906
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	9,670	$	12,943
Accrued liabilities		43,872		38,427
Current portion of deferred revenue		2,033		2,008
Current portion of acquisition-related contingent consideration		7,391		2,657
Current portion of operating lease liabilities		7,294		5,105
Current portion of other liabilities		53		101
Total current liabilities		70,313		61,241
Deferred tax liabilities		1,470		734
Acquisition-related contingent consideration, net of current portion		14,225		518
Operating lease liabilities, net of current portion		12,400		7,525
Other liabilities		571		786
Total liabilities		98,979		70,804
Total stockholders’ equity		1,176,042		1,044,102
Total liabilities and stockholders’ equity	$	1,275,021	$	1,114,906

1. The condensed consolidated balance sheet at December 31, 2023 has been derived from the audited financial statements at that date included in the Company’s Form 10-K filed with the Securities and Exchange Commission dated February 29, 2024.


VERACYTE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands)

	Nine Months Ended September 30,
		2024			2023
Operating activities
Net income (loss)	$	19,025		$	(46,111	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		17,206			20,852
Loss on disposal of property, plant and equipment		131			136
Stock-based compensation		26,620			25,629
Deferred income taxes		10			(843	)
Noncash lease expense		3,628			3,130
Revaluation of acquisition-related contingent consideration		1,242			(5,500	)
Effect of foreign currency on operations		(785	)		657
Impairment loss		614			36,310
Changes in operating assets and liabilities:
Accounts receivable		(8,396	)		4,650
Supplies and inventory		(4,175	)		(1,636	)
Prepaid expenses and other current assets		149			(1,578	)
Other assets		(1,710	)		(586	)
Operating lease liabilities		(3,929	)		(3,225	)
Accounts payable		(2,950	)		185
Accrued liabilities and deferred revenue		3,892			(3,400	)
Net cash provided by operating activities		50,572			28,670
Investing activities
Acquisition of C2i, net of cash acquired		5,012			—
Purchase of short-term investments		—			(19,700	)
Proceeds from sale of short-term investments		—			39,773
Proceeds from maturity of short-term investments		—			5,000
Purchases of property, plant and equipment		(7,146	)		(7,464	)
Net cash (used in) provided by investing activities		(2,134	)		17,609
Financing activities
Payment of taxes on vested restricted stock units		(7,315	)		(5,614	)
Proceeds from the exercise of common stock options and employee stock purchases		16,729			7,806
Net cash provided by financing activities		9,414			2,192
Increase in cash, cash equivalents and restricted cash		57,852			48,471
Effect of foreign currency on cash, cash equivalents and restricted cash		(23	)		(134	)
Net increase in cash, cash equivalents and restricted cash		57,829			48,337
Cash, cash equivalents and restricted cash at beginning of period		217,330			154,996
Cash, cash equivalents and restricted cash at end of period	$	275,159		$	203,333


CASH, CASH EQUIVALENTS AND RESTRICTED CASH (Unaudited) (In thousands)

	September 30,		December 31,
		2024		2023
Cash and cash equivalents	$	274,079	$	216,454
Restricted cash		1,080		876
Total cash, cash equivalents and restricted cash	$	275,159	$	217,330


VERACYTE, INC. RECONCILIATION OF U.S. GAAP to NON-GAAP FINANCIAL MEASURES (Unaudited) (In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
		2024			2023			2024			2023
Reconciliation of Non-GAAP Cost of Revenue:
GAAP cost of testing revenue	$	29,029		$	21,827		$	82,928		$	64,808
Stock-based compensation expense		(524	)		(382	)		(1,411	)		(1,048	)
Acquisition related expenses (1)		—			—			(60	)		(74	)
Other adjustments (2)		—			—			(6	)		—
Non-GAAP cost of testing revenue	$	28,505		$	21,445		$	81,451		$	63,686

GAAP cost of product revenue		1,792			2,436			6,310			6,913
Stock-based compensation expense		(1	)		—			(3	)		—
Acquisition related expenses (1)		—			—			—			—
Other adjustments (2)		—			—			—			—
Non-GAAP cost of product revenue	$	1,791		$	2,436		$	6,307		$	6,913

GAAP cost of biopharmaceutical and other revenue		3,112			3,347			9,762			11,806
Stock-based compensation expense		(62	)		(120	)		(264	)		(337	)
Acquisition related expenses (1)		—			—			—			—
Other adjustments (2)		—			—			—			—
Non-GAAP cost of biopharmaceutical and other revenue	$	3,050		$	3,227		$	9,498		$	11,469

Reconciliation of Non-GAAP Gross Margin:
GAAP Gross Profit	$	79,010		$	57,687		$	219,391		$	164,896
GAAP Gross Margin		68	%		64	%		67	%		63	%
Amortization of intangible assets		2,917			4,811			8,741			14,429
Stock-based compensation expense		587			502			1,678			1,385
Acquisition related expenses (1)		—			—			60			74
Other adjustments (2)		—			—			6			—
Non-GAAP Gross Profit	$	82,514		$	63,000		$	229,876		$	180,784
Non-GAAP Gross Margin		71	%		70	%		70	%		69	%

1. Includes transaction-related expenses as well as post-combination compensation expenses. For the nine months ended September 30, 2024, adjustments consist primarily of transaction related expenses associated with the acquisition of C2i Genomics. For the nine months ended September 30, 2023, adjustments consist primarily of post-combination compensation expenses associated with the acquisition of HalioDx.
2. For the nine months ended September 30, 2024, adjustments include expense related to restructuring costs associated with portfolio prioritization.


VERACYTE, INC. RECONCILIATION OF U.S. GAAP to NON-GAAP FINANCIAL MEASURES (Unaudited) (In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
		2024			2023			2024			2023
Reconciliation of Non-GAAP Operating Expenses:
GAAP research and development	$	17,574		$	13,322		$	50,004		$	38,632
Stock-based compensation expense		(1,957	)		(1,135	)		(5,615	)		(3,831	)
Acquisition related expenses (1)		459			—			62			—
Other adjustments (2)		5			—			(271	)		—
Non-GAAP research and development	$	16,081		$	12,187		$	44,180		$	34,801

GAAP sales and marketing	$	22,612		$	24,344		$	70,610		$	76,230
Stock-based compensation expense		(1,790	)		(2,521	)		(5,025	)		(7,126	)
Acquisition related expenses (1)		—			(209	)		(124	)		(1,366	)
Other adjustments (2)		7			—			(1,087	)		—
Non-GAAP sales and marketing	$	20,829		$	21,614		$	64,374		$	67,738

GAAP general and administrative	$	25,742		$	16,334		$	83,697		$	62,434
Stock-based compensation expense		(4,413	)		(3,174	)		(14,302	)		(13,539	)
Acquisition related expenses (1)		(349	)		4,790			(4,934	)		3,165
Other adjustments (2)		(248	)		—			(3,368	)		66
Non-GAAP general and administrative	$	20,732		$	17,950		$	61,093		$	52,126

GAAP total operating expenses	$	66,993		$	89,426		$	207,424		$	215,184
Amortization of intangible assets		(880	)		(526	)		(2,499	)		(1,578	)
Stock-based compensation expense		(8,160	)		(6,830	)		(24,942	)		(24,496	)
Acquisition related expenses (1)		(75	)		4,581			(5,610	)		1,799
Other adjustments (2)		(236	)		(34,900	)		(4,726	)		(36,244	)
Non-GAAP total operating expenses	$	57,642		$	51,751		$	169,647		$	154,665

1. Includes transaction-related expenses as well as post-combination compensation expenses. For the three months ended September 30, 2024, adjustments consist primarily of transaction related expenses associated with the acquisition of C2i Genomics ($0.1 million). For the three months ended September 30, 2023, adjustments consist primarily of remeasurement of contingent consideration related to our adoption of a multi-platform IVD strategy and post-combination compensation expenses associated with the acquisition of HalioDx. For the nine months ended September 30, 2024, adjustments consist of transaction related expenses associated with the acquisition of C2i Genomics. For the nine months ended September 30, 2023, adjustments consist primarily of remeasurement of contingent consideration related to our adoption of a multi-platform IVD strategy and post-combination compensation expenses associated with the acquisition of HalioDx.
2. For the three months ended September 30, 2024, adjustments primarily include expense related to restructuring costs ($0.2 million). For the three months ended September 30, 2023, adjustments include $34.9 million expense related to nCounter license impairment related to our adoption of a multi-platform IVD strategy. For the nine months ended September 30, 2024, adjustments primarily include expense related to restructuring costs associated with a reduction in our Biopharmaceutical and Other segment ($3.1 million) and expense related to restructuring costs associated with portfolio prioritization including the reduction in Envisia commercial support ($1.6 million). For the nine months ended September 30, 2023, adjustments primarily include $34.9 million expense related to the impairment charge associated with the nCounter license intangible assets and $1.3 million related to other impairment charges.

Contacts

Investors:
Shayla Gorman
investors@veracyte.com
619-393-1545

Media:
Tracy Morris
media@veracyte.com
650-380-4413

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