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Good afternoon, and welcome to Castle Biosciences first quarter 2026 conference call. As a reminder, today's call is being recorded. We will begin today's call with opening remarks and introductions, followed by a question-and-answer session. I would like to turn the call over to Camilla Zuckero, Vice President, Investor Relations and Corporate Affairs. Please go ahead.

Thank you, operator. Good afternoon, everyone. Welcome to Castle Biosciences first quarter 2026 results conference call. Joining me today are Castle's Founder, President, and Chief Executive Officer, Derek Maetzold, and Chief Financial Officer, Frank Stokes. Information recorded on this call speaks only as of today, May 6th, 2026. Therefore, if you're listening to the replay or reading the transcript of this call, any time-sensitive information may no longer be accurate. A recording of today's call will be available on the Investor Relations page of the company's website for approximately three weeks following the conclusion of the call.

Before we begin, I would like to remind you that some of the statements made today will contain forward-looking statements, including statements about expected addressable markets, statements containing projections regarding future events or our future financial or operational results and performance, including our anticipated 2026 total revenue and the impact our investments and growth initiatives, including our ability to achieve long-term growth and drive stockholder value. Forward-looking statements are based upon current expectations and involve inherent risks and uncertainties. There can be no assurances the results contemplated in these statements will be realized. A number of factors and risks could cause actual results to differ materially from those contained in these forward-looking statements. Please refer to the risk factors in our most recent SEC filings for more information.

These forward-looking statements speak only as of today, and we assume no obligation to update or revise these forward-looking statements as circumstances change. In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted revenue, adjusted gross margin, and Adjusted EBITDA that have not been calculated in accordance with U.S. GAAP. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the Investor Relations page of the company's website. I will now turn the call over to Derek.

Thank you, Camilla, and good afternoon, everyone. We delivered strong first quarter results building on our momentum from 2025. Thanks to the strong execution by the entire Castle team, we delivered revenue of $83.7 million. Test report volumes for our core revenue drivers grew 36% compared to the first quarter of 2025. Excluding DecisionDx-SCC and IDgenetix revenue, our revenue growth for the first quarter of 2026 is approximately 42% compared to the first quarter of 2025, highlighted by double-digit year-over-year test report volume growth for both DecisionDx-Melanoma and TissueCypher.

Throughout the first quarter of 2026, our teams remain focused on executing our growth priorities, and our strong performance gives us confidence to raise our 2026 revenue outlook to between $345 million-$355 million, compared to our previous provided guidance of $340 million-$350 million. Now, I will walk you through business highlights from the first quarter, and then Frank will provide additional financial highlights before we turn to your questions. Let's start with our core revenue drivers and what we see as the bulk of our 2026 top-line growth story, DecisionDx-Melanoma and TissueCypher. For DecisionDx-Melanoma, we delivered 10,021 test reports in the first quarter, representing 16% year-over-year growth. Further, March of 2026 saw an all-time high record month for test reports delivered.

We believe DecisionDx-Melanoma remains a durable growth driver and continue to expect mid to high single-digit volume growth for the full year 2026. Driving test adoption and sustaining our competitive advantage through robust clinical evidence remains a key priority. We recently presented new data at the 2026 American Academy of Dermatology annual meeting demonstrating that our DecisionDx-Melanoma test can significantly improve risk prediction within American Joint Committee on Cancer, or AJCC, stages for patients with cutaneous melanoma. These data from 1,868 SEER-linked patients showed that DecisionDx-Melanoma significantly stratifies five-year melanoma-specific survival within AJCC stages and T categories, identifying patients whose mortality risk is substantially higher or lower than staging alone would predict.

What this means is that in this study, DecisionDx-Melanoma provided clinically meaningful differences in risk within the same stage, enabling more personalized risk-aligned management decisions by helping clinicians identify patients who may warrant closer monitoring or early intervention while also recognizing those who may safely be managed less intensively. These great results are in addition to our recently published data from the prospective multicenter study evaluating DecisionDx-Melanoma's i31-SLNB test result. Data from this prospective U.S.-based study confirmed again that our test identifies patients with a less than 5% predicted risk consistent with the National Comprehensive Cancer Network guideline thresholds while maintaining favorable outcomes and outperforming traditional staging criteria. Let's turn to our gastroenterology franchise.

During the first quarter of 2026, we delivered 11,745 TissueCypher test reports compared to 7,432 in the first quarter of 2025, which is 58% growth. Consistent with our DecisionDx-Melanoma test in March, March also represented an all-time record month for TissueCypher. Two studies were recently presented at the Digestive Disease Week by researchers at the Mayo Clinic. The findings demonstrated how molecular risk stratification with a TissueCypher test refined risk assessment and directly informed real-world management decisions for patients with Barrett's esophagus, with one study showing changes in surveillance intervals in more than half of patients compared with recommendations guided by traditional histopathology alone, supporting more personalized, risk-aligned patient management. Look to our news release from earlier this month for more information on these studies.

Looking to the full year, we expect to add a similar number of tests in 2026 as it is in 2025, indicating year-over-year growth approaching 50%. Let's move on to what we believe are our midterm, which we view as 2027 and 2028 revenue drivers, which includes our AdvanceAD-Tx test in addition to our core revenue drivers. As a reminder, AdvanceAD-Tx is our first-in-class test designed to guide systemic treatment selection for patients 12 years of age and older with moderate to severe atopic dermatitis or AD. You may recall that we released this test under a limited access program mid-fourth quarter of 2025. Continuing on our limited access during the first quarter, we received approximately 650 orders.

Initial responses indicate that clinicians appreciate that AdvanceAD-Tx integrates into their existing AD care pathway, helping to make more informed systemic therapy choices early in the patient treatment journey. Supporting this claim, during the quarter, we published data from a prospective multicenter clinical validation study in the Journal of the American Academy of Dermatology demonstrating that AdvanceAD-Tx can identify patients with moderate to severe atopic dermatitis who are significantly more likely to achieve greater and faster responses when treated with a JAK inhibitor compared to a Th2 biological therapy.

The data show that AdvanceAD-Tx can stratify patients by molecular profile, identifying those more likely to achieve near clear skin or EASI-90 faster time to response and meaningful patient-reported benefits when taking a JAK inhibitor, supporting improved outcomes and more biologically informed systemic treatment decisions early in the treatment journey with JAK inhibitor therapy as compared to Th2 targeted biologic therapy. Based on revenue cycle timelines, we expect to be in a position to provide more detail on reimbursement by the end of the third quarter of 2026. With that, I'll now turn the call over to Frank.

Thank you, Derek. Good afternoon, everyone. As Derek noted, our first quarter financial performance marks a strong start to 2026. Revenue was $83.7 million for the first quarter of 2026, driven by continued strength in our core revenue drivers. For total revenue for 2026, we are raising our revenue guidance to $345 million-$355 million, up from the previously provided range of $340 million-$350 million. This is growth of high teens to low 20%s in 2026 over 2025, excluding revenue from DecisionDx-SCC and IDgenetix from the 2025 and 2026 totals. Our gross margin during the first quarter of 2026 was 72.8% compared to 49.2% in the first quarter of 2025.

As a reminder, first quarter of 2025 gross margin reflects the one-time adjustment of an acceleration of amortization expense of approximately $20.1 million. Our adjusted gross margin, which excludes the effects of intangible asset amortization related to our acquisitions and excludes the effects of revenue adjustments in the current period associated with test reports delivered in prior periods, was 75.6% for the quarter, compared to 81.2% for the same quarter in 2025. Turning to expenses, our total operating expenses, including cost of sales for the first quarter of 2026, were $102.1 million compared to $115.9 million for the first quarter of 2025.

Sales and marketing expenses for the quarter were $41 million compared to $36.8 million for the same period in 2025, primarily driven by higher personnel costs and higher sales-related travel expenses. Increases in personnel costs reflect a higher headcount driven by sales force expansion as well as merit and annual inflationary wage adjustment for existing employees. Higher sales-related travel expenses reflect increased field activity to support growing test report volumes. General and administrative expenses were $23.9 million for the quarter, compared to $21.8 million for the same period in 2025, primarily attributable to higher personnel costs, higher information technology-related costs, and higher travel costs, partially offset by a decrease in professional fees. Increases in personnel costs reflect headcount expansions in our administrative support functions as well as merit and annual inflationary wage adjustment for existing employees.

Cost of sales expenses were $20.5 million in the first quarter of 2026 compared to $16.4 million in the first quarter of 2025, primarily due to higher expenses for lab supplies, higher lab services costs, higher personnel costs, and higher depreciation expense. The increase in expenses for lab supplies and lab services expense was driven by higher test report volumes. Increases in personnel costs reflect a higher headcount due to additions made to support business growth in response to growing test report volumes, as well as merit and annual inflationary wage adjustments for existing employees. The higher depreciation expense reflects continued investment in and expansion of our laboratory facilities.

R&D expenses were $14.4 million for the quarter, compared to $12.6 million for the same period in 2025, primarily due to higher personnel costs and higher clinical studies costs. The increases in personnel costs reflect a higher headcount to support continued business growth, and increases in clinical studies costs reflect investment in our pipeline products. Total non-cash stock-based compensation expense, which is allocated among cost of sales, R&D, and SG&A expense, was $9.8 million for the first quarter of 2026, compared to $11.2 million in the first quarter of 2025. Interest income was $2.5 million for the first quarter of 2026, compared to $3.1 million in the first quarter of 2025.

Our net loss for the first quarter of 2026 was $14.5 million, compared to a net loss of $25.8 million for the first quarter of 2025. Diluted loss per share for the first quarter was $0.49, compared to a diluted loss per share of $0.90 for the same period in 2025. Adjusted EBITDA for the first quarter was negative $5.1 million, compared to $13 million for the comparable period in 2025. The year-over-year change primarily reflects a one-time non-cash amortization expense recognized in 2025 related to the accelerated amortization of our IDgenetix test.

Net cash used in operating activities was $22.1 million for the first quarter of 2026, due in part to annual cash bonus payments and certain healthcare benefit payments that do not recur through the remaining three quarters of the year. Net cash used in investing activities was $25.8 million for the first quarter and consisted primarily of purchases of marketable investment securities of $55.1 million, purchases of property and equipment, partially offset by the maturities of marketable investment securities and the sale of equity securities. As of March 31st, 2026, we had cash and cash equivalents and marketable securities of $261.7 million. As we've discussed, we expect M&A to play a role in our growth story, and we intend to continue to evaluate candidates that fit within our strategic opportunities criteria.

In closing, I'm pleased with our strong first quarter results and increased guidance, which reflect the consistent execution and momentum we're building across the entire business. I'll now turn the call back over to Derek.

Thank you, Frank. In summary, I am pleased with our strong start to 2026. We remain confident in our ability to execute our growth strategy and drive long-term value to our stockholders. Finally, I want to thank the entire Castle team, their dedication to advancing patient care and improving patients' lives. We're proud of our accomplishments and excited about the path ahead, and we look forward to sharing our continued progress in the coming quarters. Thank you for your continued interest in Castle Biosciences. Now, we will be happy to take your questions. Operator?

Thank you. In order to allow everyone in the queue an opportunity to address the Castle management team, please limit your time on the call to one question and only one follow-up. If you have additional questions, please return to the queue. If you would like to ask a question, please type star one on your telephone keypad to raise your hand. Please stand by while we compile the Q&A roster. Your first question comes from the line of Mason Carrico with Stephens. Your line is open. Please go ahead.

Hey, guys. Thanks for taking the questions here. I wanted to start out with TissueCypher volume, 58% growth year-over-year. Obviously, that's great growth. Volumes did decline very modestly quarter-over-quarter. That just hasn't happened since early 2024, I think. Any unique dynamics to call out in the quarter that may have contributed to that, whether seasonality, anything capacity-related? Just, I guess any color there would be great.

Yeah, sure, Mason. Thanks. You know, as you noted, we continue to see really strong growth there with 58% year-over-year growth. On the sequential or quarter-to-quarter trend there, you know, I think we finally have hit the penetration level where we are seeing seasonality and feeling the sense of that. Based on looking at IQVIA third-party data, historically, the first quarter of the year has fewer GI procedures than the other quarters. Having said that, importantly, you know, March was a record month for TC, and that trend continued in April. I think we would expect to add a similar number of test reports in 2026 as we did in 2025.

That gets us something close to a 50% year-over-year growth for the year. Good performance on the test and we continue to be pleased with what we're seeing.

Got it. Thanks, Frank. Could you guys update, or would you give us an update on the reimbursement initiatives for your AdvanceAD-Tx test or the progress you've made on that front? I guess as kind of a follow-up to that, on the potential for revenue to become material there in 2027 or 2028, where do you expect that revenue to come from? Is it all from appeals, or could there be some other revenue model contributing next year by 2028?

Hi, Mason, Derek here. We think, based upon the long revenue cycles from an RCM perspective, we could be in a position probably by the end of the third quarter to provide some good evidence-based clarity in terms of what we're seeing, what we can assume for 2027, 2028 under a traditional reimbursement approach. There are, of course, other avenues as well in terms of interested parties who may be interested in controlling the cost of having patients keep cycling around medications. Of course, there's always an opportunity to potentially partner with some of these pharmaceutical companies who might have an interest in having their share shifted.

For right now, I would say if we relied primarily on traditional governmental or private payer reimbursement probably end of third quarter so we can give some strong clarity based on evidence.

Your next question comes from the line of Thomas Flaten with Lake Street. Your line is open. Please go ahead.

Yeah, good afternoon. I appreciate you taking the questions. I think you guys were relocating to a new Phoenix lab, at some point this year. Any update on what impact that might have on gross margins going forward?

I don't think we'll see much impact on gross margins, Thomas. We haven't made that change yet. We're moving into an expanded facility in the Phoenix area. That's really an eye towards, as you recall from working with us for a while, we try to stay a couple of years ahead of demand in terms of capacity. As we look at the expanding Derm franchise and the growth in those test volumes in particular, we're trying to stay ahead of it. I don't have guidance for you on when we'll make that move, but I don't think you'll see much impact on gross margin at all as we shift from one facility to the other.

Got it. On AdvanceAD-Tx, any thoughts on broadening this initial rollout? I think you had 150 accounts targeted as the first group. Will that stay at those 150 for the foreseeable future, at least until you have more visibility into reimbursement?

We opened up access a bit more in this first quarter, of this late in the first quarter. We'll kind of look at our volume, look at our early RCM assumptions here, make sure we're on track, and then kind of continue to go ahead and release it over time. That being said, having 650 orders come in the door in the first quarter is very, very nice reinforcement of the opportunity that we have here when the field force is 100% focused on melanoma, and we have such limited access to our customer base. We are quite pleased with the continued early response of the dermatologic clinicians out there in the field.

Your next question comes from the line of Catherine Schulte with Baird. Your line is open. Please go ahead.

Hi, guys. Thanks for the questions. Maybe first for the mid to high single-digit melanoma volume growth for the year, you know, off to a really strong start there with mid-teens growth in 1Q. You know, should that double-digit growth continue in the second quarter with some conservatism baked into the back half? How should we think about the phasing there?

Yeah. We did reiterate, Catherine, our 2026 mid to high single-digit growth expectations. Q1 was a bit of an easier comp than we expect for the rest of the year. We're pleased with that, and I think that's where we see the business trending.

Okay. I guess, have you guys been getting any feedback from clinicians regarding some of the moving pieces on NCCN guidelines and, you know, any feedback you've received on the Future Oncology publication or any other data that you've put out recently?

We continue to get good feedback on, "I don't quite understand what NCCN sees here. This is a failed study, failed to meet the 5% cut point here, so what's trying to be said?" Which is good for us. I think unfortunately from an NCCN standpoint, there's a belief that this is really more political than we even thought, I guess you would say. We're hearing that from most of our customers. The side study which came out in Future Oncology earlier this year was another strong reinforcement that if you use our test to look at accuracy, once again, we have one more study showing that we comfortably get way below 5% predicted risk in people who actually underwent an SLNB.

As important in that same publication is that people who used our test to move away from SLNB, meaning you didn't know if you were gonna be positive or negative, had extremely strong outcomes. I think it was 97.8% recurrence-free survival over the time period of the publication. That is a really safe melanoma patient, if you can, I guess, use those two words together, right? That continues to be strong reinforcement that we've got data that they can rely upon, that's consistent over time, which is excellent. I think that's what also led to having our greatest month ever in March of this year.

Your next question comes from the line of Subbu Nambi with Guggenheim. Your line is open. Please go ahead.

Hi, guys. This is Thomas on for Subbu. Thanks for taking our questions. Frank, you mentioned M&A. Is that something you're looking at near-term? Can you just walk us through those factors you're considering when evaluating targets and your criteria there?

I mean, I think we always are open-eyed to what may be a possibility. We own things as we become aware of them. We don't feel compelled to chase anything. I think we've got a great opportunity with what we own and control today. You know, we do look at things as they come around or come across us. As you know, the Goldilocks approach is pretty tough. I mean, things have to look pretty good, but we do think that could be part of the future.

Great. Separately on, maybe on Salesforce, can you just give an update today on Derm and GI? Then maybe how headcount expansion is expected to look for this year and how does that translate to selling and marketing spend? Thanks.

Yeah, what we said is we think we can cover for the time being in the near term both of those verticals with fewer than 100 reps, and that's where we are today.

Your next question comes from the line of Matthew Parisi with KeyBanc Capital Markets. Your line is open. Please go ahead.

Hi. Sorry, I was on mute. This is Matthew Parisi on for Paul Knight at KeyBanc Capital Markets. Congrats on the quarter, and thanks for taking my question. You previously mentioned in 2025 that melanoma received FDA breakthrough designation. I was wondering if Castle is still preparing for, like, an FDA submission in 2026 that you'd mentioned.

We are moving forward with a submission along that same timeline, sometime in 2026 here, yes.

All right, thank you. Just one other follow-up. Just wondering if there's been an update on SCC. I know you guys had received acceptance of the reconsideration requests for both Novitas and MolDX, and if there's just any update or an idea on timing.

No, no official update, I guess, from either one of the Medicare contractors, Palmetto or Novitas since, I guess, our year-end earnings call a few weeks ago. We still continue to believe that that kind of a year-plus review cycle should be plenty of time for a reconsideration request that was accepted in, I guess, July and September accordingly between Novitas and MolDX. We aren't at this point in time thinking that there is a later posting of a draft LCD than sort of the second half of this year. That would be surprising.

Your next question comes from the line of Kyle Mikson with Canaccord. Your line is open. Please go ahead.

Hey, guys. Thanks for the questions. This may have been covered, I apologize. On the 150 orders for the AdvanceAD-Tx test, could you just talk about, you know, recent trends and how you expect that to accelerate going forward? When you think about that number getting into the thousands, I guess, you know, in the relatively near term here, how does that affect the cost structure of the company, I guess? I know it's obviously not super material, but as we see gross margin decline, you know, sequentially and things like that, I'm just curious how we should be thinking about P&L impact.

You're more about COGS impact or AdvanceAD-Tx? Kyle, I think that what we see right now the primary hurdle for our AdvanceAD-Tx is just our candidly our willingness to how available do we wanna make it. In terms of impacting the overall COGS profile, that's a pretty efficient test. It's a PCR-based test, even with some growth in volumes from where we were in Q1, we wouldn't expect a material impact on the blended adjusted COGS structure of the company, certainly in the next several quarters anyway.

Now on that note, I guess the, you know, how do you guys kind of anticipate expenses, the cadence of expenses throughout this year? Because it was a little bit surprising to see the net loss and the kind of the lower than expected EBITDA in the quarter. As we think about cash flow positivity, and that's been this goal for, you know, 2026, 2027, for a while with that SEC, what's the updated thoughts on that, on metrics?

As you know, we continue to focus growth on three windows, Kyle: near, medium, and long term. As we support that, we do expect some growth in operating expenses. I think as we get through Q1 here and we lap the more meaningful change in SCC revenue, we'll get to a more meaningful comparability period going forward. I think that we continue to grow into the P&L and leverage the cost structure and our intent there is to generate meaningful returns on those operating expenses, driving value going forward.

Your next question comes from the line of Puneet Souda with Leerink Partners. Your line is open. Please go ahead.

Yes. Hi, guys. Thanks for the questions here. First one, maybe on the guide itself, you beat by, you know, $4 million, raised about $5 million, largely banking the beat. Just wanted to understand how much of the beat was from SCC, and then I have a follow-up on the TissueCypher.

Yeah. Most of that beat was driven by TissueCypher.

Okay. Got it. Then, you know, can you maybe provide a little bit more color on the TissueCypher ramp throughout the year? I think you called out you had two best quarter. That's, I think you mean March and April, two best month, March and April, maybe that was sequentially down. I didn't exactly catch that. Maybe if you can provide some more color there. How should we think about the ramp from 1Q to 2Q? I mean, it seems it could be larger than what you saw last year, you know, especially given another 18,000 up year-over-year. Maybe just talk to me in terms of the TissueCypher ramp. Thank you.

As we said, Puneet, we continue to think we'll add a similar number of tests for reports for 2026 as 2025. I think we're big enough or penetrated enough now that probably some seasonality is finally to the point where we feel it. As I referenced, the number of procedures tends to be lower in Q1. I think we'll see that growth come ratably through the year. I don't see, I'm not aware of things quarter-to-quarter that should shift that from more of a ratable ramp.

There are no further questions at this time. I will now turn the call back to Derek for closing remarks.

This concludes our first quarter 2026 earnings call. Thank you again for joining us today and for your continued interest in Castle Biosciences.

This concludes today's call. Thank you for attending. You may now disconnect.