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CASTLE BIOSCIENCES INC (CSTL)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue was $88.0M, up 21% year over year, and above S&P Global consensus ($80.4M), while GAAP diluted EPS of $(0.90) missed consensus (−$0.07); Adjusted EBITDA was $13.0M and Adjusted Gross Margin held at 81.2% despite a one-time $20.1M amortization linked to discontinuing IDgenetix . Values retrieved from S&P Global.*
  • Management raised FY2025 revenue guidance to $287–$297M (prior $280–$295M), but this is below S&P consensus ($333.0M), reflecting the April 24 Medicare non‑coverage for DecisionDx‑SCC and a shift of derm sales focus to melanoma . Values retrieved from S&P Global.*
  • Core test momentum continued: TissueCypher reports grew 117% YoY to 7,432; DecisionDx‑SCC reports rose 22% YoY to 4,375; DecisionDx‑Melanoma surpassed 200,000 lifetime orders and was +3% YoY in Q1 .
  • Strategic GI expansion: signed a definitive agreement to acquire Previse (methylation technology Esopredict; expected to close in weeks), with revenue impact immaterial near‑term; potential to combine methylation and spatialomics to strengthen Barrett’s offering .

What Went Well and What Went Wrong

What Went Well

  • Strong top-line and core test growth: revenue +21% YoY to $88.0M; Adjusted revenues $87.2M (+22% YoY); TissueCypher test reports +117% YoY to 7,432; DecisionDx‑SCC +22% YoY to 4,375; DecisionDx‑UM +11% YoY to 470 .
  • Resilient margins ex one-time: Adjusted Gross Margin 81.2% (vs 80.5% LY) despite accelerated amortization; Adjusted EBITDA $13.0M vs $10.5M LY .
  • Management tone and evidence build: “exceptional start to the year” and milestone of 200,000 DecisionDx‑Melanoma orders; multiple new studies and conference presentations validating DecisionDx‑Melanoma and DecisionDx‑SCC utility .

Quote: “We are pleased with the exceptional start to the year… we are raising our 2025 total revenue guidance to $287-297 million.” — Derek Maetzold, CEO .

What Went Wrong

  • EPS miss versus consensus: GAAP diluted EPS of $(0.90) vs S&P consensus −$0.07, driven by a one‑time $20.1M amortization tied to discontinuing IDgenetix . Values retrieved from S&P Global.*
  • SCC reimbursement headwind: Novitas LCD non‑coverage for DecisionDx‑SCC effective April 24, 2025; company pursuing reconsideration with Novitas and MolDX; near‑term derm sales force shifting toward melanoma .
  • IDgenetix discontinued effective May 2025; related accelerated amortization depressed GAAP gross margin to 49.2%, and near‑term modest revenue impact (though positive for EBITDA) .

Financial Results

P&L, Margins, Cash Flow vs Prior Quarters and Estimates

MetricQ3 2024Q4 2024Q1 2025
Revenue ($M)$85.8 $86.3 $88.0
GAAP Diluted EPS ($)$0.08 $0.32 $(0.90)
GAAP Gross Margin (%)79.2% 76.2% 49.2%
Adjusted Gross Margin (%)81.9% 81.1% 81.2%
Adjusted EBITDA ($M)$21.6 $21.3 $13.0
Net Income (Loss) ($M)$2.3 $9.6 $(25.8)
Net Cash from Ops ($M)$23.3 $24.4 $(6.0)
Estimates vs ActualQ1 2025 ConsensusQ1 2025 ActualSurprise
Revenue ($M)80.38*88.00 +$7.62M / +9.5%*
GAAP Diluted EPS ($)−0.07*−0.90 −$0.83 (miss)*

Values retrieved from S&P Global.*

Segment Revenue Breakdown

Segment Revenue ($M)Q3 2024Q4 2024Q1 2025
Dermatologic$65.1 $63.8 $63.0
Non‑Dermatologic$20.7 $22.5 $25.0
Total$85.8 $86.3 $88.0

KPIs: Test Reports by Product

KPI (Test Reports)Q3 2024Q4 2024Q1 2025
DecisionDx‑Melanoma9,367 8,672 8,621
DecisionDx‑SCC4,195 4,299 4,375
MyPath Melanoma933 879 926
TissueCypher (Barrett’s)6,073 6,672 7,432
IDgenetix5,045 3,125 2,578
DecisionDx‑UM397 424 470
Total Test Reports26,010 24,071 24,402

Note: GAAP gross margin decline in Q1 reflects a one‑time $20.1M amortization related to IDgenetix discontinuation; Adjusted metrics exclude this impact .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($M)FY 2025$280–$295 $287–$297 Raised
Adjusted Gross Margin (%)FY 2025 (remaining quarters)Not previously quantifiedMid‑70s (per quarter) New qualitative guide
Operating Cash FlowFY 2025Goal to achieve operating cash flow positivity by end of 2025 Expect positive net cash flow from operations for FY 2025 Maintained/affirmed

Regulatory/reimbursement update: Novitas LCD with non‑coverage for DecisionDx‑SCC effective April 24, 2025; company is pursuing reconsiderations with Novitas and MolDX .

Earnings Call Themes & Trends

TopicQ3 2024 (Prev-2)Q4 2024 (Prev-1)Q1 2025 (Current)Trend
DecisionDx‑SCC reimbursementCovered; evidence growing; raised FY24 guide Strong Q4; FY25 guide set; awareness of potential LCD risk Novitas LCD non‑coverage effective 4/24; pursuing reconsideration; shifting derm sales to melanoma Deteriorated reimbursement; strategic pivot
TissueCypher growthVolumes +115% YoY; strong clinical utility and adoption Continued growth; NYSDOH approval Volumes +117% YoY; expanded GI sales force; expect consistent growth Accelerating adoption
IDgenetixHigh growth; market challenges noted Promotional shift to inside sales/non‑personal channels Discontinued effective May 2025; amortization acceleration Exited product
Adjusted Gross Margin82% adj GM; stable 81% adj GM; stable 81.2% adj GM; mid‑70s guide for remaining quarters Stable ex one‑time; modest compression expected
Operating cash flowPositive and improving Positive $24.4M Q4; strong FY24 cash gen Q1 seasonal use ($6.0M); expect FY25 positive ops CF Seasonality; full‑year positive
R&D/pipeline (AD test)Progress; target launch by end 2025 Progress update; 2025 launch target Still on track; market research ongoing Steady progress
GI strategy/Previse——Signed definitive agreement to acquire Previse; immaterial near‑term revenue; combination with TissueCypher envisioned Expanding GI vertical

Management Commentary

  • Strategic positioning: “We believe our first‑quarter results demonstrate our leadership across our proprietary, first‑to‑market test portfolio and unwavering commitment to impacting patient outcomes.” — Derek Maetzold .
  • Melanoma milestone: “DecisionDx‑Melanoma recently achieved a significant milestone, surpassing 200,000 test orders since the launch of the test.” — Derek Maetzold .
  • SCC reimbursement path: “We will be pursuing reconsideration requests of both the Novitas and MolDX LCDs… we believe the reconsideration request could be accepted as valid.” — Derek Maetzold .
  • Margin/guide clarification: “That’s adjusted gross margin… and it does include the fall‑off of reimbursement for SCC.” — Frank Stokes .

Q&A Highlights

  • Adjusted GM outlook: Management guided mid‑70s adjusted GM for the remaining 2025 quarters, inclusive of SCC reimbursement falloff .
  • Derm sales focus: Field force to shift heavily toward melanoma in 2H25 given SCC Medicare outcome; expected lift from single‑test focus .
  • SCC reconsideration timing: No specific timing benchmarks; do not reinsert SCC revenue into 2025 models at this stage .
  • Previse deal: Technology acquisition; no stock consideration; near‑term revenue/EBITDA impact immaterial; opportunity to combine methylation with spatialomics and explore non‑endoscopic sponge tech .
  • IDgenetix: Discontinuation improves EBITDA despite modest revenue loss; payers “especially difficult” in PGx mental health space .

Estimates Context

  • Q1 2025 results vs consensus: Revenue beat (+9.5%); EPS missed materially (−$0.83). Values retrieved from S&P Global.*
  • FY 2025 revenue: Company guide $287–$297M vs S&P consensus $333.0M; midpoint ($292M) is ~$41M below consensus, reflecting SCC headwinds, melanoma focus, and strong non‑derm growth (TissueCypher). Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Top-line strength with diversified engines: Non‑derm (TissueCypher) is driving mix shift; dermatology stable with melanoma focus; SCC uncertainty requires caution in modeling .
  • Expect adjusted margin resilience: Despite GAAP noise from amortization, adjusted GM remains ~81%; plan for mid‑70s through 2025 as mix/reimbursement evolve .
  • EPS volatility tied to one‑time amortization: The accelerated $20.1M IDgenetix amortization drove a GAAP EPS miss; underlying adjusted profitability improved YoY .
  • Regulatory risk key to scenario analysis: SCC Medicare status is a swing factor; management is pursuing reconsideration but advises not to model SCC revenue in 2025 pending outcomes .
  • GI expansion is strategic, not immediate: Previse enhances Barrett’s franchise with methylation and potential upstream screening; revenue impact is longer‑dated .
  • Cash and liquidity supportive: $275.2M in cash, equivalents, and marketable securities; management expects FY25 positive operating cash flow .
  • Trade setup: Near‑term catalysts include steady TissueCypher volume growth and melanoma sales focus versus SCC reimbursement overhang; narrative likely driven by evidence publications and guidance cadence .

Footnote: All consensus estimate values marked with an asterisk are from S&P Global.