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CASTLE BIOSCIENCES INC (CSTL)·Q3 2025 Earnings Summary

Executive Summary

  • Strong quarter with broad-based execution: revenue $83.0M, total test reports 26,841; Dermatologic (DecisionDx-Melanoma) and GI (TissueCypher) each surpassed 10,000 reports for the first time, but headline revenue declined YoY due to Medicare non-coverage of DecisionDx-SCC and the discontinuation of IDgenetix .
  • Material beat versus S&P Global consensus and guidance raise: Q3 revenue beat by ~$11.9M and EPS beat materially; FY25 revenue guidance raised to $327–$335M from $310–$320M on sustained core momentum and GI outperformance; management reiterated operating cash flow positivity trajectory in 2025 . Values retrieved from S&P Global*.
  • Non-dermatologic revenue surged 67% YoY, reflecting TissueCypher strength; GAAP gross margin compressed to 74.7% (mix, SCC coverage overhang), while Adjusted Gross Margin was 76.8% .
  • Strategic pipeline milestone: launch of AdvanceAD‑Tx, a 487‑gene test to guide systemic therapy for moderate-to-severe atopic dermatitis, with a limited-access launch in Nov 2025 and phased expansion in 2026; revenue contribution expected to be immaterial in 2026 as reimbursement pathways are built .
  • Near-term stock catalysts: outsized consensus beat, guidance raise, and the AD test launch; overhang remains from SCC Medicare LCD (reconsideration requests accepted by both Novitas and MolDX) .

What Went Well and What Went Wrong

What Went Well

  • Core franchise momentum and records: “DecisionDx-Melanoma and TissueCypher each surpassing 10,000 test reports for the first time in a single quarter,” underscoring adoption; CEO: “We delivered a strong third quarter, generating $83 million in revenue and 26,841 in total test report volume.” .
  • Guidance raised on execution: FY25 revenue guidance to $327–$335M (from $310–$320M), cited strong execution and momentum in core dermatologic and GI testing franchises .
  • AdvanceAD‑Tx launch expands TAM: management introduced a first‑in‑class test with encouraging physician intent to use and a targeted, phased commercial rollout; “we will clinically launch… this month… and expect to expand in a phased manner throughout 2026” .

What Went Wrong

  • Revenue YoY decline and margin pressure: Q3 revenue fell to $83.0M from $85.8M YoY with GAAP gross margin down to 74.7% (from 79.2%) as SCC LCD non‑coverage and IDgenetix discontinuation weighed on results .
  • Adjusted EBITDA contracted: Q3 Adjusted EBITDA of $9.2M vs $21.6M a year ago, reflecting mix, operating expense growth to support scale, and SCC headwinds .
  • SCC reimbursement uncertainty persists: Though reconsideration requests were accepted by both Novitas and MolDX, timing and outcome remain uncertain; Management: “there is no specified timeline for a final reconsideration decision” .

Financial Results

P&L Snapshot vs Prior Periods and Estimates

MetricQ3 2024Q2 2025Q3 2025Q3 2025 Consensus*Delta (Actual – Consensus)
Revenue ($M)$85.8 $86.2 $83.0 $71.1*+$11.9M*
Diluted EPS ($)$0.08 $0.15 -$0.02 -$0.52*+$0.50*
Gross Margin % (GAAP)79.2% 77.3% 74.7% ——
Adj. Gross Margin %81.9% 79.5% 76.8% ——
Adjusted EBITDA ($M)$21.6 $10.4 $9.2 -$1.6 (EBITDA)*n/a

Notes: Consensus values retrieved from S&P Global*. EBITDA Consensus Mean is shown as S&P-defined EBITDA; company reports Adjusted EBITDA.

Segment/Type Mix (Q3 2025)

Revenue TypeQ3 2025
Dermatologic ($M)$48.5
Non‑Dermatologic ($M)$34.5
Non‑Derm YoY Growth+67%

KPI – Test Volumes

TestQ3 2024Q3 2025
DecisionDx‑Melanoma (units)9,367 10,459
TissueCypher (units)6,073 10,609
DecisionDx‑SCC (units)4,195 4,186
MyPath Melanoma (units)933 1,151
DecisionDx‑UM (units)397 436
Total Test Reports (units)26,010 26,841

Cash Flow and Liquidity (Q3 2025)

MetricQ3 2024Q3 2025
Net Cash from Operations ($M)$23.3 $22.6
Cash, Cash Equivalents & Marketable Securities ($M)—$287.5 (as of 9/30/25)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenue ($M)FY 2025$310–$320 (Aug-25) $327–$335 (Nov-25) Raised

Management has also highlighted a goal of achieving operating cash flow positivity by end of 2025 (strategic commentary), but no explicit numeric OCF guidance was issued .

Earnings Call Themes & Trends

TopicQ1 2025 (Q‑2)Q2 2025 (Q‑1)Q3 2025 (Current)Trend
SCC Reimbursement (LCD)IDgenetix discontinued; SCC paid in Q1; LCD effective 4/24 noted ahead SCC LCD non‑coverage effective; Novitas reconsideration request accepted Reconsideration requests accepted by Novitas and MolDX; timing uncertain Slowly improving process visibility; outcome/timing uncertain
DecisionDx‑MelanomaContinued evidence and milestones; >200k orders FDA Breakthrough Device designation; high single-digit FY volume growth target Q3 volume record >10k; sales force focus on melanoma in 2H Sustained adoption, focused commercial push
TissueCypher (GI)Strong YoY growth; BE risk stratification data +92% YoY volume; expanding GI commercial team; Previse close 10,609 reports (+75% YoY); new data shows identifying higher-risk NDBE patients Rapid penetration, evidence reinforcing utility
AdvanceAD‑Tx (AD)Pipeline test expected by end‑2025 Pipeline advancing; multiple reimbursement routes considered Launched (limited access) Nov‑2025; phased expansion 2026; immaterial 2026 revenue From pipeline to commercial launch
Margins/CostQ1 gross margin hit by IDgenetix amortization; Adj GM ~81% Adj GM 79.5%; mix and SCC impact GAAP GM 74.7%, Adj GM 76.8%; SCC/mix pressures continue Downtrend vs 2024; still strong vs peers per mgmt
M&A/PartnershipsPrevise acquisition announced (GI) Previse closed; SciBase AD flares collaboration No new M&A; leveraging prior deals for pipeline Building multi‑omics GI and AD pipeline

Management Commentary

  • “We delivered a strong third quarter, generating $83 million in revenue and 26,841 in total test report volume… DecisionDx‑Melanoma and TissueCypher each surpassing 10,000 test reports… we are raising our full‑year 2025 total revenue guidance to $327–$335 million.” — Derek Maetzold, CEO .
  • “We will clinically launch AdvanceAD‑Tx on a limited access model this month… and expect to expand in a phased manner throughout 2026.” — CEO .
  • “We submitted LCD reconsideration requests… and received notification from both Medicare contractors that… our reconsideration requests were determined to be valid requests and were accepted as such.” — CEO .
  • “Adjusted gross margin… was 76.8%… Adjusted EBITDA for the third quarter was $9.2 million… Net cash provided by operating activities was $22.6 million.” — CFO .

Q&A Highlights

  • SCC Medicare LCD: Both Novitas and MolDX accepted reconsideration requests; no statutory timeline; management intends to continue offering SCC clinically, citing patient benefit, with modest commercial claims revenue still occurring episodically .
  • Melanoma volumes and seasonality: Q3 uplift likely aided by focused derm team; Q4 typically flat/down seasonally (holidays, fewer clinic days) .
  • TissueCypher trajectory: Early penetration with substantial runway; management cautions against straight‑lining growth as denominator increases; focus on education and workflows across GI clinics and ASC settings .
  • AdvanceAD‑Tx reimbursement: “Multiple pathways” under evaluation (Medicare, commercial, other); revenue immaterial in 2026 as access is built .
  • Margins: Low‑to‑mid 70s Adjusted Gross Margin discussed previously; SCC and mix remain headwinds; Q3 Adjusted GM 76.8% .

Estimates Context

  • Q3 2025 vs S&P Global consensus: revenue $83.0M vs $71.1M* (beat ~$11.9M); EPS -$0.02 vs -$0.52* (beat $0.50); 8 revenue and 8 EPS estimates contributed and S&P Global*.
  • Prior quarter Q2 2025 also exceeded S&P revenue/EPS means (actual $86.2M vs $71.4M*; $0.15 vs -$0.53*), suggesting consensus underappreciated core growth and pricing/mix resilience and S&P Global*.
  • Next quarter (Q4 2025) consensus: revenue $76.2M*, EPS -$0.34*; given raised FY guide and continued GI momentum, Street may need to recalibrate if execution persists. Values retrieved from S&P Global*.

Consensus detail (S&P Global)*:

  • Q3 2025: Revenue mean $71.135M; EPS mean -$0.5225; EBITDA mean -$1.62M; # ests: Rev 8, EPS 8.
  • Q4 2025: Revenue mean $76.222M; EPS mean -$0.3438.
  • Q2 2025: Revenue mean $71.409M; EPS mean -$0.5311.

Guidance Changes – Table

MetricPeriodPreviousCurrentRationale/Notes
Total Revenue ($M)FY 2025$310–$320 (8/4/25) $327–$335 (11/3/25) Core test momentum (Melanoma, TissueCypher), non‑derm +67% YoY; SCC headwind manageable

Why the Quarter Looked Like This (Diagnostics)

  • Topline mix shift: Despite SCC non‑coverage and IDgenetix exit, non‑derm (GI) grew +67% YoY, with TissueCypher volumes +75% YoY; DecisionDx‑Melanoma volumes +12% YoY and >10k quarterly reports for the first time, supporting raised guidance .
  • Margin dynamics: GAAP GM 74.7% and Adj GM 76.8% reflect SCC reimbursement and mix impacts; still strong on an absolute basis; operating expenses grew with scaling of commercial and lab capacity .
  • Liquidity intact: $287.5M cash/securities and $22.6M operating cash flow in Q3 support continued pipeline and commercialization investments .

Additional Quantitative Tables

Actual vs Consensus (Q3 2025) – S&P Global*

MetricActualConsensus*Surprise*
Revenue ($M)$83.043 $71.135*+$11.908*
Diluted EPS ($)-$0.02 -$0.5225*+$0.5025*
EBITDA ($M)(company Adj EBITDA) $9.160 S&P EBITDA mean -$1.618*n/a*

Footnote: Estimates values retrieved from S&P Global*.

Quarterly Revenue Trend 2025

QuarterRevenue ($M)
Q1 2025$88.0
Q2 2025$86.2
Q3 2025$83.0

Key Takeaways for Investors

  • The magnitude of the Q3 beat versus consensus and the FY25 guidance raise should be a positive catalyst; Street likely under‑modeled non‑derm growth and core adoption and S&P Global*.
  • SCC LCD remains the primary overhang; both MACs accepted reconsideration filings, but timing uncertain—watch for any draft LCD updates; management intends to continue offering SCC to support patient care .
  • TissueCypher’s sustained outperformance and positive real‑world data provide a durable second growth engine; further penetration should support the mix even amid SCC pressure .
  • AdvanceAD‑Tx launch opens a large TAM with phased 2026 ramp; near‑term revenue immaterial, but commercial synergy with existing dermatology customers may accelerate adoption once reimbursement matures .
  • Margins: expect continued mix‑related pressure versus 2024 levels; watch Adjusted Gross Margin trajectory and operating expense discipline as GI scales .
  • Liquidity and cash generation provide flexibility to invest in pipeline and evidence, supporting medium‑term value creation .

Sources:

  • Q3 2025 8‑K and press release (financials, guidance, KPIs): .
  • Q3 2025 earnings call transcript (themes, Q&A): .
  • Q2 2025 8‑K and call (prior‑quarter comps, guidance history): .
  • Q1 2025 8‑K (trend context): .

Estimates: Values retrieved from S&P Global*.