• Revenue: $439.8 million, up 64% year-over-year.
• Oncology Tests: Approximately 137,000 tests performed, up 54% from last year.
• Gross Margin: 62%, a record for the company.
• Cash Generation: $34.5 million generated in the quarter.
• Revenue Guidance: Raised to $1.61 billion to $1.64 billion for the year.
• ASP for Signatera: Approximately $1,050, before true-ups.
• Gross Margin Guidance: Full year expected range of 58% to 61%.
• Cash Flow Guidance: Expected cash generation of $50 to $75 million for the year.
• Day Sales Outstanding (DSO): Approximately 73 days in Q3.
• Convertible Notes: Retired early, effectively making the company debt-free.

• Warning! GuruFocus has detected 5 Warning Signs with NTRA.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Natera Inc (NASDAQ:NTRA) reported a record revenue of $439.8 million for Q3 2024, marking a 64% increase from the previous year.
• The company achieved a significant milestone by generating $34.5 million in cash this quarter, after breaking even on cash for a couple of quarters.
• Gross margins reached a record 62% in Q3, driven by strong ASPs and execution on cost projects.
• Natera Inc (NASDAQ:NTRA) raised its revenue guidance for the year to $1.61 billion to $1.64 billion, implying about 50% revenue growth for the full year.
• The company has seen strong demand for its new fetal rhd test, launched at a critical time for the prenatal community.

Negative Points

• Despite the strong financial performance, the company faces ongoing litigation expenses and non-cash charges related to stock-based compensation.
• There is potential for quarter-to-quarter volatility in ASPs, which could impact financial performance.
• The company is cautious about the impact of weather events, such as hurricanes, which could affect future quarters.
• Natera Inc (NASDAQ:NTRA) continues to face challenges with insurance payers, including prior authorization and medical records requests.
• The company acknowledges that the growth rates may become challenging as the base business becomes larger, potentially impacting future growth expectations.

Q & A Highlights

Q: Can you outline the ASP pick up that you're seeing across the product? How can Signatera ASP continue to grow and the stability of ASP across other products? A: Michael Brophy, CFO: Signatera ASPs have moved from the eight hundreds to about $1,050 on an organic basis. There's potential for further growth through execution with Medicare Advantage payers and state biomarker laws. For other products, particularly in women's health, we've seen strong improvement, and we have confidence in maintaining ASPs due to their established role in standard care.

Q: How much of the lift are you seeing from volume growth in the community setting versus academic settings? A: Steven Chapman, CEO: We see uplift in both academic and community settings. About 40% of oncologists are using Signatera, indicating significant market penetration potential. Data generation, like the Galaxy study, helps bring more physicians on board, especially those waiting for long-term survival data.

Q: Regarding the Nature Medicine paper, where is it most helpful, and what do you expect from the 702 study results? A: Alexey Aleshin, CMO: The Nature Medicine study is helpful across the board, showing Signatera's predictive ability for overall survival. The 702 study, involving over 1,000 patients, will report on Signatera's ability to predict DFS and OS benefits from Celecoxib. Results will be shared at the ASCO GI conference.

Q: Can you speak to the drivers of gross margin expansion and the trajectory into 2025? A: Michael Brophy, CFO: The mix shift towards Signatera, now our biggest revenue product, is driving corporate gross margin improvement. While ASP increases will moderate, we expect continued corporate gross margin improvement into 2025, supported by strong Signatera margins and data.

Q: Have you seen any uptick in prior authorization or documentation requirements from private payers? A: Steven Chapman, CEO: We haven't noticed significant changes recently. Natera has developed systems to handle payer obstacles like prior authorizations and denials. We continue to improve our response to these challenges, and we see opportunities for ASP improvement through additional coverage.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.