• Revenue: $85.8 million, a 39% increase over Q3 2023.
• Adjusted Revenue: $86.3 million, a 42% increase over Q3 2023.
• Gross Margin: 79.2%, compared to 77.9% in Q3 2023.
• Adjusted Gross Margin: 81.9%, compared to 81.3% in Q3 2023.
• Net Income: $2.3 million, compared to a net loss of $6.9 million in Q3 2023.
• Diluted Earnings Per Share: $0.08, compared to a diluted loss per share of $0.26 in Q3 2023.
• Adjusted EBITDA: $21.6 million, an improvement of $15.1 million from Q3 2023.
• Net Cash Provided by Operating Activities: $23.3 million for Q3 2024.
• Cash, Cash Equivalents, and Marketable Securities: $279.8 million at the end of the quarter.
• Full Year 2024 Revenue Guidance: Raised to $320 million to $330 million, reflecting 45% to 50% year-over-year growth.

• Warning! GuruFocus has detected 4 Warning Sign with CSTL.

Release Date: November 04, 2024

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

Positive Points

• Castle Biosciences Inc (NASDAQ:CSTL) reported a 39% increase in revenue and a 41% increase in total test report volume compared to the third quarter of 2023.
• The company achieved positive cash flow and earnings, highlighting the operating leverage in its business model.
• Castle Biosciences Inc (NASDAQ:CSTL) raised its full-year 2024 revenue guidance to between $320 million to $330 million, reflecting year-over-year growth of 45% to 50%.
• The DecisionDx-Melanoma test showed a 9% year-over-year increase in test reports, with approximately 30% market penetration.
• The TissueCypher test for esophageal cancer risk assessment saw a 115% year-over-year growth in test report volume.

Negative Points

• General and administrative expenses increased to $20.7 million in the third quarter of 2024, up from $16.1 million in the same period of 2023, primarily due to higher personnel costs and professional fees.
• Sales and marketing expenses rose to $29.8 million in the third quarter of 2024, compared to $28.5 million in the same period of 2023.
• The company experienced higher cost of sales expenses, which increased to $15.6 million in the third quarter of 2024 from $11.3 million in the third quarter of 2023.
• Castle Biosciences Inc (NASDAQ:CSTL) faces challenges in the reimbursement landscape, particularly for its pharmacogenomic test, IDgenetix, due to inconsistent payments from commercial insurers.
• The company anticipates potential volume impacts in the fourth quarter due to recent hurricanes affecting dermatology practices in certain regions.

Q & A Highlights

Q: Can you discuss the dermatology revenue step down from Q2 to Q3 and the impact of non-coverage by certain payers on DecisionDx-SCC revenue? A: Frank Stokes, CFO: The sequential volume trends are predictable, with Q2 typically being the largest due to patient encounters and reduced physician office days in Q3. We did not see an impact from non-coverage by certain payers on DecisionDx-SCC revenue in Q3.

Q: Can you provide an update on the inflammatory disease test market opportunity and competitive landscape? A: Derek Maetzold, CEO: We are on track to provide a public update on our progress by the end of the year, with a potential launch before the end of 2025. The test targets moderate to severe patients initiating systemic biologic therapy, aiming to improve treatment response predictions.

Q: What feedback did you receive from physicians at the ACG conference regarding TissueCypher, and what pushback are you encountering? A: Derek Maetzold, CEO: We are in the early stages of physician awareness. Resistance is low, mainly due to lack of awareness. The test is being used to identify high-risk patients for intervention and to de-escalate care for low-risk patients.

Q: How are you planning to expand the GI team, and what is the current rep count? A: Derek Maetzold, CEO: We expanded to around 40 territories earlier this year and plan to increase to the low 60s, targeting 10,000 gastroenterologists. The exact number is data-driven and based on our ability to impact these customers.

Q: Can you provide an update on the reimbursement strategy for DecisionDx-SCC and any discussions with Palmetto? A: Derek Maetzold, CEO: We continue to be reimbursed by Medicare, and the recent studies support the test's utility. We are pursuing reconsideration with Palmetto, but there is no significant update on discussions.

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