CARIS THIRD QUARTER 2026 FINANCIAL RESULTS CONFERENCE CALL - CARIS LIFE SCIENCES INC

Financial Performance:

• Total revenue grew 27% year-over-year (YoY) to $275.4 million, driven by molecular profiling services revenue of $262.7 million (up 27%).
• Clinical case volume reached 61,500, representing 21% YoY growth, marking the strongest volume growth in over a year.
• Blended Average Selling Price (ASP) increased 5% YoY to $4,272; base ASP (excluding true-ups) rose 19% YoY to approximately $4,000.
• GAAP net income turned positive at $15.3 million, reversing a net loss of $24.3 million in the prior year; Year-to-date (YTD) net income is $14.1 million.
• Adjusted EBITDA was $44.4 million, the sixth consecutive quarter of positive adjusted EBITDA; YTD adjusted EBITDA reached $126.3 million.
• Gross margin stood at 66%; free cash flow was negative $39.7 million in the quarter due to planned capital expenditures ($17.5 million) and inventory reinvestment, but is expected to turn positive in Q4.
• Balance sheet remained strong with $769.2 million in cash and investments; $10 million in stock was repurchased under the authorized program.

Guidance and Future Outlook:

• Full-year 2026 revenue guidance raised to $1.04 billion–$1.05 billion, reflecting 28–29% growth driven by molecular profiling.
• Q4 2026 revenue guidance set at $285 million–$295 million; clinical therapy selection volume guidance for Q4 is approximately 65,000 cases.
• Management expects full-year GAAP operating expenses of approximately $620 million (up ~26%), funding expanded sales, marketing for CARES Detect, and R&D.
• Full-year adjusted EBITDA and free cash flow are expected to be positive.
• 2027 reimbursement rates for CARES Assure increased to $5,250 (from $3,650) effective January 1, 2027, expected to lift realized ASPs.
• Management intends to continue expanding the commercial organization beyond the current 325 FTEs and sees no end in sight to hiring.

Business Segments and Product Lines:

• Therapy Selection (Core): MyCancerSeq and CARES Assure remain the volume drivers; tissue and blood segments both saw YoY growth acceleration.
• New Launches: CARES Assure Therapy Response Monitoring launched in Q3 (whole exome, liquid biopsy); CARES Confirmed (whole genome MRD) scheduled for December launch.
• Early-Stage Detection (MSED): CARES Detect launched; revenue currently booked in "Pharma R&D services" ($12.7 million, up 37% YoY) until volumes become material for separate reporting.
• Pipeline: Five products planned for launch by year-end; the platform now spans the entire cancer care continuum (detection, therapy selection, monitoring, MRD).
• AI & Data: "HERO" pathology foundation model trained on 248k+ H&E slides with paired multi-omic data; dataset now exceeds 1.2 million profiled cases.

Market and Competitive Landscape:

• CARES Detect targets early-stage (Stage 1/2) cancers where cure rates are highest; management argues methylation-only approaches lack sufficient sensitivity for these stages.
• Strategic channel partnerships expanding with digital platforms, concierge medicine groups, and longevity companies; 75% of orders placed via EMR/portal channels.
• Karis Precision Oncology Alliance now includes 102 sites; strong institutional relationships facilitate cross-selling of the expanding product suite.
• Management maintains a "deeper, not cheaper" philosophy, prioritizing technology breadth/depth over unit cost optimization, though sequencing costs are expected to decline due to market competition in 2027.

Risks and Challenges:

• Reimbursement Timelines: New products (Monitoring, MRD) face multi-year reimbursement pathways; MRD reimbursement submissions targeted for 2027.
• Capacity Constraints: Current sequencing capacity is insufficient for long-term DETECT demand; ramping capacity to ~$1B revenue potential is a focus (evidenced by CapEx spend).
• Inventory & Working Capital: Elevated inventory levels due to pre-launch stocking for DETECT and Achieve 2 studies, contributing to negative free cash flow in the quarter.
• Consumer Education: Success of DETECT relies on public awareness; management is cautious about overspending on marketing relative to capacity.
• Regulatory Path: No immediate plans for FDA approval of CARES Detect; strategy focuses on generating real-world evidence (Achieve 2 readout expected Q1 2027) to secure reimbursement first.

Management Commentary and Tone:

• Tone: Confident, disciplined, and strategic; management emphasized that the "deeper not cheaper" strategy is working and delivering consecutive quarters of accelerating volume.
• Strategy: Leadership expressed pride in funding initiatives internally without external capital, maintaining financial discipline while aggressively investing in commercial expansion.
• Focus: CEO highlighted the importance of treating early-stage cancer and avoiding the "methylation trap," positioning whole-genome approaches as superior.
• M&A Stance: Management stated they are open to M&A but currently prefer organic growth, citing a lack of targets that would provide incremental technological value.

Analyst Questions and Answers:

• Volume Mix: Q&A confirmed tissue and blood volumes both accelerated in Q3, with blood growth starting from a smaller base but maintaining a faster rate.
• Detect Revenue: Analysts asked if DETECT revenue is included in Q4 guidance; management confirmed it is not, remaining in the smaller "Pharma R&D" line until material.
• ASP Drivers: Q4 ASP guidance assumes continued strength in market access, particularly following the 2027 CLFS rate increases for CARES Assure.
• Reimbursement Strategy: For CARES Confirmed (MRD), management expects to submit for reimbursement after publishing the colorectal cancer trial data, targeting a 2027 rollout.
• Sales Force: Management confirmed hiring will continue beyond 325 FTEs to capitalize on the broadening product line and market opportunity.
• Competitive Response: When asked about competitors with lower costs, management reiterated a focus on superior technology first, anticipating COGS improvements in 2027 as sequencing technology advances.

Other Key Points:

• Achieve Program: Expanded to four studies totaling 63,000 patients; Achieve 2 (25k patients) is 80% enrolled with an interim readout expected Q1 2027.
• Personalized Mutation Interception: A new strategy leveraging CARES Detect for early signal identification and vaccine development, utilizing a ranking model with 83.8% PPV.
• Platform Leverage: New MRD and Monitoring products utilize the same infrastructure and workflows as existing therapy selection products, maximizing commercial leverage.
• Digital Footprint: Over 3,500 physicians now order directly through EMR portals; 1,300+ scientific publications support the platform's evidence base.