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Veracyte Announces Third Quarter 2022 Financial Results

Grew Total Revenue to $75.6 million, an Increase of 25%

Conference Call and Webcast Today at 4:30 p.m. ET

SOUTH SAN FRANCISCO, Calif., November 02, 2022--(BUSINESS WIRE)--Veracyte, Inc. (Nasdaq: VCYT) today announced financial results for the third quarter ended September 30, 2022.

"Our third quarter results were robust given test adoption growth across our key products, new reimbursement contracts and expanded clinical evidence for our tests," said Marc Stapley, Veracyte’s chief executive officer. "We continue to invest in our long-term growth drivers, while maintaining our firm focus on financial discipline. I’m delighted with our team’s progress as we pursue our global vision of improving outcomes for patients all over the world through our exceptional diagnostic tests."

Key Business Highlights:

  • Increased third quarter total revenue by 25% to $75.6 million, compared to the third quarter of 2021.

  • Grew total test volume to 26,374, an increase of 26% compared to the third quarter of 2021.

  • Bolstered commercial reimbursement:

    • Received positive coverage decisions for the Decipher Prostate Genomic Classifier from three commercial payers representing over 20 million members, bringing the total number of covered lives for the test to 195 million; and

    • Signed four new commercial payer contracts for the Afirma Genomic Sequencing Classifier, bolstering the test’s in-network coverage to over 230 million health plan members.

  • Further reinforced the value and utility of our portfolio offerings through guideline inclusion and expanded clinical evidence:

    • Received a "Level 1" evidence designation in the National Comprehensive Cancer Network® (NCCN®)’s update to the 2023 prostate cancer guidelines, making the Decipher Prostate Genomic Classifier the first and only prostate cancer gene expression test to achieve this status;

    • Published data from a prospective, multi-site, Phase 2 clinical study in the Journal of the National Cancer Institute suggesting that the Decipher Prostate test may help identify African American men with early, localized prostate cancer who are most likely to harbor aggressive disease;

    • Shared data from Phase 3 of the multi-center, randomized STAMPEDE trial at the European Society for Medical Oncology (ESMO) conference, which confirm the Decipher Prostate test’s ability to identify men with advanced prostate cancer who are more likely to benefit from intensified treatment, potentially expanding the test’s use;

    • Presented data at the American Thyroid Association’s annual meeting suggesting that Veracyte’s Afirma thyroid database and whole-transcriptome capabilities may enable identification of genomic signatures to help predict tumor behavior in thyroid cancer;

    • Presented data at the European Respiratory Society and American College of Chest Physicians (CHEST 2022) annual meetings suggesting the Envisia Genomic Classifier’s ability to provide prognostic information for people with suspected interstitial lung disease;

    • Published a study in Nature Medicine examining the predictive and prognostic potential of Veracyte’s immuno-oncology biomarkers and insight into factors associated with response to CAR T-cell therapy among patients with large B-cell lymphoma; and

    • Presented preliminary clinical utility data at the CHEST meeting for the Percepta Nasal Swab test, which suggest that the noninvasive genomic test may classify more lung nodule patients as low-risk or high-risk for lung cancer, as compared to the standard-of-care approach, which consists of a physician’s own assessment of clinical factors along with CT imaging.

  • Appointed Eliav Barr, M.D., to our Board of Directors and named John Leite, Ph.D. as general manager for Pulmonology and Market Access.

  • Generated $7.0 million in cash from operating activities and ended the third quarter of 2022 with cash, cash equivalents and short-term investments of $170.1 million, compared to $164.0 million at the end of the second quarter of 2022.

Third Quarter 2022 Financial Results

Total revenue for the third quarter of 2022 was $75.6 million, an increase of 25% compared to $60.4 million in the third quarter of 2021. Testing revenue was $64.6 million, an increase of 27% compared to $50.9 million in the third quarter of 2021 driven primarily by the strong performance of our Decipher and Afirma tests. Product revenue was $3.3 million, an increase of 12% compared to $3.0 million in the third quarter of 2021. Biopharmaceutical and other revenue was $7.7 million, an increase of 18% compared to $6.5 million in the third quarter of 2021, driven primarily by the contribution of the HalioDx acquisition.

Total gross margin for the third quarter of 2022, including the amortization of acquired intangible assets, was 59%, compared to 57% in the third quarter of 2021. Non-GAAP gross margin, excluding the amortization of acquired intangible assets and other acquisition related expenses was 66%, compared to 64% in the third quarter of 2021.

Operating expenses, excluding cost of revenue, were $54.6 million, an increase of 5% compared to the third quarter of 2021. Non-GAAP operating expenses, excluding cost of revenue, amortization of acquired intangible assets, other acquisition related expenses and other restructuring costs, were $51.1 million compared to $42.4 million in the third quarter of 2021.

Net loss for the third quarter of 2022 was $8.7 million, an improvement of 38% compared to the third quarter of 2021. Basic and diluted net loss per common share was $0.12, an improvement of 40% compared to the third quarter of 2021. Net cash used by operating activities in the first nine months of 2022 was $2.2 million, an improvement of $37.9 million compared to the same period in 2021.

A reconciliation of GAAP to non-GAAP financial measures has been provided in the tables included in this press release. An explanation of these measures is also included below under the heading "Note Regarding Use of Non-GAAP Financial Measures."

2022 Financial Outlook

The company is raising full-year 2022 total revenue expectations to $288 million to $293 million, representing year-over-year growth of 31% to 33%, assuming currency rates as of November 2, 2022. This represents an improved outlook compared to our prior guidance of $272 million to $280 million.

Conference Call and Webcast Details

Veracyte will host a conference call and webcast today at 4:30 p.m. Eastern Time to discuss the company's financial results and provide a general business update. The conference call will be webcast live from the company’s website and will be available via the following link: https://edge.media-server.com/mmc/p/iigzqcix. The webcast should be accessed 10 minutes prior to the conference call start time. A replay of the webcast will be available for one year following the conclusion of the live broadcast and will be accessible on the company’s website at https://investor.veracyte.com/events-presentations.

The conference call dial-in can be accessed by registering at the following link: https://register.vevent.com/register/BIdd8a25033ce74acb8bf03d2ed76733f0

About Veracyte

Veracyte (Nasdaq: VCYT) is a global diagnostics company that improves patient care by answering important clinical questions to inform diagnosis and treatment decisions. Our growing menu of advanced diagnostic tests help patients avoid risky, costly procedures and interventions, and reduce time to appropriate treatment. In addition to making our tests available in the United States through our central laboratories, our exclusive license to our best-in-class diagnostics instrument (nCounter Analysis System) positions us to deliver our tests to patients worldwide through laboratories that can perform them locally. Veracyte is based in South San Francisco, California. For more information, please visit www.veracyte.com and follow the company on Twitter (@veracyte).

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements, including, but not limited to, our statements related to our expected total revenue and other financial and operating results for 2022 and our plans, objectives, expectations (financial and otherwise) or intentions with respect to our Prosigna, Afirma, Percepta, Envisia, LymphMark, Decipher Prostate, Percepta Nasal Swab, Percepta Genomic Atlas and Decipher Bladder tests and products, including our biopharma atlas, for use in diagnosing and treating diseases, Medicare coverage, and our commercial organization. Forward-looking statements can be identified by words such as: "appears," "anticipate," "intend," "plan," "expect," "believe," "should," "may," "will," "positioned," "designed" and similar references to future periods. Actual results may differ materially from those projected or suggested in any forward-looking statements. These statements involve risks and uncertainties, which could cause actual results to differ materially from our predictions, and include, but are not limited to: our ability to launch, commercialize and receive reimbursement for our products; to demonstrate the validity and utility of our genomic tests and biopharma offerings to continue to integrate and expand the HalioDx and Decipher businesses and execute on our business plans; to continue to scale our global operations and enhance our internal control environment; the impact of the COVID-19 pandemic and its variants on our business and general economic conditions; the impact of foreign currency fluctuations and inflation; and the performance and utility of our tests in the clinical environment. Additional factors that may impact these forward-looking statements can be found under the caption "Risk Factors" in our Annual Report on Form 10-K filed on February 28, 2022, and our Quarterly Report on Form 10-Q to be filed for the three months ended September 30, 2022. Copies of these documents, when available, may be found in the Investors section of our website at www.investor.veracyte.com. These forward-looking statements speak only as of the date hereof and, except as required by law, we specifically disclaim any obligation to update these forward-looking statements or reasons why actual results might differ, whether as a result of new information, future events or otherwise.

Veracyte, the Veracyte logo, Decipher, Decipher GRID, Afirma, Percepta, Envisia, Prosigna, Lymphmark, TMExplore, Brightplex, Immunosign, "Know by Design" and "More about You" are registered trademarks of Veracyte, Inc. and its subsidiaries in the U.S. and selected countries. Immunoscore IC® is a trademark of Veracyte SAS registered in France. Immunoscore is a registered trademark of Inserm used by Veracyte under license. nCounter is the registered trademark of NanoString Technologies used by Veracyte under license.

Note Regarding Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this press release and the accompanying tables contain, and reference certain non‐GAAP results including non-GAAP gross margin, non-GAAP operating expenses, and non-GAAP loss from operations. These measures are not meant to be considered superior to or a substitute for financial measures calculated in accordance with GAAP, and investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures as an analytical tool.

We use non-GAAP measures to internally evaluate and analyze financial results. We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and enable comparison of our financial results with other public companies, many of which present similar non-GAAP financial measures. However, the non-GAAP measures we present may be different from those used by other companies.

We exclude amortization of acquired intangible assets, acquisition-related expenses relating to our acquisitions of Decipher Biosciences and HalioDx and certain costs related to restructuring from certain of our non-GAAP measures. Management has excluded the effects of these items in non-GAAP measures to help investors gain a better understanding of the core operating results and future prospects of the company, consistent with how management measures and forecasts the company's performance, especially when comparing such results to previous periods or forecasts. The company encourages investors to carefully consider its results under GAAP, as well as its supplemental non‐GAAP information and the reconciliation between these presentations, to more fully understand its business.

Reconciliations between our GAAP results and non‐GAAP financial measures are presented in the tables of this release.

VERACYTE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands of dollars, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Revenues:

Testing revenue

$

64,577

$

50,897

$

180,275

$

134,768

Product revenue

3,314

2,959

9,401

8,706

Biopharmaceutical and other revenue

7,701

6,514

26,563

8,704

Total revenue

75,592

60,370

216,239

152,178

Operating expenses (1):

Cost of testing revenue

19,816

16,073

55,923

42,494

Cost of product revenue

1,981

1,491

5,202

4,304

Cost of biopharmaceutical and other revenue

4,211

4,079

13,626

4,720

Research and development

10,773

8,006

29,316

19,591

Selling and marketing

25,678

21,670

73,433

57,628

General and administrative

17,600

20,749

58,310

82,504

Intangible asset amortization

5,213

4,983

16,090

10,507

Total operating expenses

85,272

77,051

251,900

221,748

Loss from operations

(9,680

)

(16,681

)

(35,661

)

(69,570

)

Other income (loss), net

805

1,202

2,675

(762

)

Loss before income taxes

(8,875

)

(15,479

)

(32,986

)

(70,332

)

Income tax benefit

(152

)

(1,350

)

(270

)

(5,297

)

Net loss

$

(8,723

)

$

(14,129

)

$

(32,716

)

$

(65,035

)

Net loss per common share, basic and diluted

$

(0.12

)

$

(0.20

)

$

(0.46

)

$

(0.97

)

Shares used to compute net loss per common share, basic and diluted

71,656,694

69,743,733

71,456,008

66,820,654

1. Cost of revenue, research and development, sales and marketing and general and administrative expenses include the following stock-based compensation related expenses:

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Cost of revenue

$

290

$

193

$

947

$

481

Research and development

1,692

1,276

4,801

3,191

Selling and marketing

2,015

1,804

4,721

3,441

General and administrative

3,445

4,961

9,954

9,041

Total stock-based compensation expense

$

7,442

$

8,234

$

20,423

$

16,154

VERACYTE, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Net loss

$

(8,723

)

$

(14,129

)

$

(32,716

)

$

(65,035

)

Other comprehensive loss:

Change in currency translation adjustments

(16,016

)

(8,140

)

(38,983

)

(8,140

)

Net comprehensive loss

$

(24,739

)

$

(22,269

)

$

(71,699

)

$

(73,175

)

VERACYTE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

September 30,

December 31,

2022

2021

(Unaudited)

(See Note 1)

Assets

Current assets:

Cash and cash equivalents

$

170,112

$

173,197

Short-term investments

3,964

Accounts receivable

40,068

41,461

Supplies and inventory

13,798

11,225

Prepaid expenses and other current assets

14,538

13,255

Total current assets

238,516

243,102

Property and equipment, net

17,237

15,098

Right-of-use assets, operating leases

13,885

16,043

Intangible assets, net

176,542

202,731

Goodwill

676,885

707,904

Restricted cash

749

749

Other assets

2,143

2,198

Total assets

$

1,125,957

$

1,187,825

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

11,114

$

12,360

Accrued liabilities

32,137

39,475

Current portion of long-term debt

1,187

1,127

Current portion of deferred revenue

3,863

4,646

Current portion of acquisition-related contingent consideration

5,913

2,682

Current portion of operating lease liabilities

3,958

3,630

Current portion of other liabilities

180

231

Total current liabilities

58,352

64,151

Deferred revenue, net of current portion

343

Deferred tax liabilities

4,342

5,592

Acquisition-related contingent consideration, net of current portion

2,411

5,722

Operating lease liabilities, net of current portion

11,527

14,096

Other liabilities

1,148

1,407

Total liabilities

77,780

91,311

Total stockholders’ equity

1,048,177

1,096,514

Total liabilities and stockholders’ equity

$

1,125,957

$

1,187,825

1. The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited financial statements at that date included in the Company's Form 10-K filed with the Securities and Exchange Commission dated February 28, 2022.

VERACYTE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands of dollars)

Nine Months Ended September 30,

2022

2021

Operating activities

Net loss

$

(32,716

)

$

(65,035

)

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

19,372

13,189

Loss on disposal of property and equipment

72

Stock-based compensation

19,867

15,787

Benefit from income taxes

(270

)

(5,297

)

Interest on end-of-term debt obligation

161

161

Noncash lease expense

2,487

1,566

Revaluation of acquisition-related contingent consideration

(80

)

303

Effect of foreign currency on operations

1,563

1,601

Impairment of intangible assets

3,318

Changes in operating assets and liabilities:

Accounts receivable

(4,356

)

(6,285

)

Supplies and inventory

(2,841

)

4

Prepaid expenses and other current assets

(25

)

(1,905

)

Other assets

160

353

Operating lease liabilities

(2,570

)

(1,710

)

Accounts payable

(325

)

3,872

Accrued liabilities and deferred revenue

(6,026

)

3,329

Net cash used in operating activities

(2,209

)

(40,067

)

Investing activities

Acquisition of Decipher Biosciences, net of cash acquired

(574,411

)

Acquisition of HalioDx, net of cash acquired

(163,645

)

Purchase of short-term investments

(8,972

)

Proceeds from maturity of short-term investments

12,696

Proceeds from sale of equity securities

3,000

Purchases of property and equipment

(6,677

)

(4,535

)

Net cash used in investing activities

(2,953

)

(739,591

)

Financing activities

Proceeds from the issuance of common stock in a public offering, net of issuance costs

593,821

Payment of long-term debt

(94

)

Payment of taxes on vested restricted stock units

(2,639

)

(8,307

)

Proceeds from the exercise of common stock options and employee stock purchases

6,134

10,633

Net cash provided by financing activities

3,401

596,147

Decrease in cash, cash equivalents and restricted cash

(1,761

)

(183,511

)

Effect of foreign currency on cash, cash equivalents and restricted cash

(1,324

)

(1,678

)

Net decrease in cash, cash equivalents and restricted cash

(3,085

)

(185,189

)

Cash, cash equivalents and restricted cash at beginning of period

173,946

349,967

Cash, cash equivalents and restricted cash at end of period

$

170,861

$

164,778

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

(Unaudited)

(In thousands of dollars)

September 30,

December 31,

2022

2021

Cash and cash equivalents

$

170,112

$

173,197

Restricted cash

749

749

Total cash, cash equivalents and restricted cash

$

170,861

$

173,946

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures

(Unaudited)

(In thousands of dollars)

Identified Expenses

GAAP

Acquisition Related Expenses (1)

Intangible Assets Amortization Expense

Other (4)

Total Non-GAAP Measure

Three Months Ended September 30, 2022

Total revenue

$

75,592

$

$

$

$

75,592

Cost of testing revenue

19,816

49

18

19,749

Cost of product revenue

1,981

3

1,978

Cost of biopharmaceutical and other revenue

4,211

62

4,149

Intangible asset amortization (2)

4,703

4,703

Gross margin $

44,881

111

4,703

21

49,716

Gross margin %

59

%

66

%

Research and development

10,773

251

10,522

Selling and marketing

25,678

923

493

24,262

General and administrative

17,600

1,272

16,328

Intangible asset amortization

510

510

Total operating expenses excluding cost of revenue (3)

54,561

2,446

510

493

51,112

Loss from operations

$

(9,680

)

$

2,557

$

5,213

$

514

$

(1,396

)

Three Months Ended September 30, 2021

Total revenue

$

60,370

$

$

$

$

60,370

Cost of testing revenue

16,073

26

16,047

Cost of product revenue

1,491

1,491

Cost of biopharmaceutical and other revenue

4,079

52

4,027

Intangible asset amortization (2)

4,517

4,517

Gross margin $

34,210

78

4,517

38,805

Gross margin %

57

%

64

%

Research and development

8,006

359

7,647

Selling and marketing

21,670

641

21,029

General and administrative

20,749

7,047

13,702

Intangible asset amortization

466

466

Total operating expenses excluding cost of revenue (3)

50,891

8,047

466

42,378

Loss from operations

$

(16,681

)

$

8,125

$

4,983

$

$

(3,573

)

1. Includes transaction related expenses as well as post-combination compensation expenses. For 2021, adjustments consist primarily of transaction-related expenses associated with the acquisition of Decipher Biosciences. For 2022, adjustments consist primarily of post-combination compensation expenses associated with the acquisition of HalioDx.

2. Includes only amortization of intangible assets identified as developed technology assets through purchase accounting transactions, which otherwise would have been allocated to cost of revenue.

3. Includes only amortization of intangible assets, which otherwise would have been allocated to research and development, selling and marketing or general and administrative expense and excludes the cost of revenue ($26.0 and $21.6 million) and the amortization of intangible assets which would have been allocated to the cost of revenue ($5.2 and $5.0 million) for Q3 2022 and 2021 respectively.

4. Includes $0.5 million expense related to restructuring costs

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures

(Unaudited)

(In thousands of dollars)

Identified Expenses

GAAP

Acquisition Related Expenses (1)

Intangible Assets Amortization Expense

Other (4)

Total Non-GAAP Measure

Nine Months Ended September 30, 2022

Total revenue

$

216,239

$

$

$

$

216,239

Cost of testing revenue

55,923

153

18

55,752

Cost of product revenue

5,202

3

5,199

Cost of biopharmaceutical and other revenue

13,626

261

13,365

Intangible asset amortization (2)

14,526

14,526

Gross margin $

126,962

414

14,526

21

141,923

Gross margin %

59

%

66

%

Research and development

29,316

1,186

28,130

Selling and marketing

73,433

2,997

493

69,943

General and administrative

58,310

3,877

3,318

51,115

Intangible asset amortization

1,564

1,564

Total operating expenses excluding cost of revenue (3)

162,623

8,060

1,564

3,811

149,188

Loss from operations

$

(35,661

)

$

8,474

$

16,090

$

3,832

$

(7,265

)

Nine Months Ended September 30, 2021

Total revenue

$

152,178

$

$

$

$

152,178

Cost of testing revenue

42,494

26

42,468

Cost of product revenue

4,304

4,304

Cost of biopharmaceutical and other revenue

4,720

52

4,668

Intangible asset amortization (2)

9,555

9,555

Gross margin $

91,105

78

9,555

100,738

Gross margin %

60

%

66

%

Research and development

19,591

360

19,231

Selling and marketing

57,628

709

56,919

General and administrative

82,504

46,415

36,089

Intangible asset amortization

952

952

Total operating expenses excluding cost of revenue (3)

160,675

47,484

952

112,239

Loss from operations

$

(69,570

)

$

47,562

$

10,507

$

$

(11,501

)

1. Includes transaction related expenses as well as post-combination compensation expenses. For 2021, adjustments consist primarily of transaction-related expenses associated with the acquisition of Decipher Biosciences. For 2022, adjustments consist primarily of post-combination compensation expenses associated with the acquisition of HalioDx.

2. Includes only amortization of intangible assets identified as developed technology assets through purchase accounting transactions, which otherwise would have been allocated to cost of revenue.

3. Includes only amortization of intangible assets, which otherwise would have been allocated to research and development, selling and marketing or general and administrative expense and excludes the cost of revenue ($74.8 and $51.5 million) and the amortization of intangible assets which would have been allocated to the cost of revenue ($14.5 and $9.6 million) for the first nine months of 2022 and 2021 respectively

4. Includes $3.3 million expense related to the impairment charge associated with certain developed technology intangible assets and $0.5 million related to restructuring costs

View source version on businesswire.com: https://www.businesswire.com/news/home/20221102005384/en/

Contacts

Investor Contact:
Shayla Gorman
Director, Investor Relations
619-393-1545
investors@veracyte.com

Media Contact:
Tracy Morris
Vice President of Global Corporate Communications
650-380-4413
tracy.morris@veracyte.com