Castle Biosciences, Inc. (CSTL) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights increased operating expenses and a net loss for 2025, contrasting with a previous net income. Adjusted EBITDA has significantly decreased, and there is uncertainty around FDA approval and NCCN guideline inclusion for key products. Despite strong market opportunities and revenue guidance, these financial concerns and vague management responses suggest a negative market reaction.
Key Financial Performance
Fourth Quarter Revenue $87.0 million, contributing to a full year revenue of $344.2 million for 2025. Excluding DecisionDx-SCC and IDgenetix revenue, the year-over-year revenue growth was approximately 34%. The growth was driven by core revenue drivers and disciplined execution.
Total Test Report Volume 105,053 test reports for 2025, a 37% increase compared to 2024. TissueCypher report volume grew by 86% year-over-year, reflecting growing clinical recognition and adoption.
DecisionDx-Melanoma Test Reports 39,083 test reports in 2025, representing 9% year-over-year growth. The growth was supported by new clinician adoption and a robust body of clinical evidence.
TissueCypher Test Reports 39,014 test reports in 2025, an 86% increase from 20,956 in 2024. The growth was driven by clinical recognition of its value in risk stratification for Barrett's esophagus.
Gross Margin 76.3% in Q4 2025 compared to 76.2% in Q4 2024. Full year gross margin was 69.2% in 2025, down from 78.5% in 2024, affected by the loss of revenue from DecisionDx-SCC and a one-time amortization expense adjustment.
Operating Expenses $387 million for 2025, up from $323.4 million in 2024. The increase was due to expanded headcount, compensation adjustments, and higher costs in sales, marketing, and IT.
Net Loss $24.2 million for 2025 compared to net income of $18.2 million in 2024. The loss was influenced by increased operating expenses and other financial adjustments.
Adjusted EBITDA $44 million for 2025, down from $75 million in 2024, reflecting changes in revenue and operating expenses.
Free Cash Flow $28.3 million for 2025, derived from net cash provided by operating activities ($64.3 million) minus capital expenditures ($36 million).
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Operating Highlights
AdvanceAD-Tx test: Launched in late November 2025, designed to guide systemic treatment selection for patients 12 years and older with moderate to severe atopic dermatitis. Early results exceeded expectations with close to 500 orders in the first 5 weeks of clinical availability.
TissueCypher: Achieved 86% growth in test report volume in 2025 compared to 2024, with 39,014 test reports delivered. Recognized by the American Gastroenterological Association as a prognostic test for Barrett's esophagus.
Market expansion for AdvanceAD-Tx: Expanded total addressable market in dermatology with the launch of AdvanceAD-Tx. Initial access limited to 150 dermatological accounts, with plans for phased expansion.
TissueCypher adoption: Increased clinical recognition and adoption, with 2,082 new ordering clinicians in 2025 compared to 1,234 in 2024.
Revenue growth: Achieved $344.2 million in revenue for 2025, driven by core revenue drivers like TissueCypher and DecisionDx-Melanoma.
Operational efficiency: Gross margin for 2025 was 69.2%, with adjusted gross margin at 79.8%. Operating expenses increased moderately to support growth initiatives.
Acquisition of Previse: Acquired a non-endoscopic cell collection device for GI diseases, with plans to initiate a development study in Q2 2026.
Collaboration with SciBase: Evaluating Electrical Impedance Spectroscopy (EIS) technology for predicting flares in atopic dermatitis, with study initiation planned for Q2 2026.
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Risk or Challenges
Revenue Dependency on Core Drivers: The company's revenue growth is heavily reliant on its core revenue drivers, DecisionDx-Melanoma and TissueCypher. Any disruption in the adoption or performance of these tests could significantly impact financial results.
Regulatory and Reimbursement Risks: The development and commercialization of new tests, such as AdvanceAD-Tx and the GI pipeline test, depend on obtaining FDA clearance and favorable reimbursement decisions. Delays or denials in these processes could hinder growth.
Market Penetration Challenges: Despite growth, patient penetration for TissueCypher and DecisionDx-Melanoma remains relatively low (11% and 31%, respectively). Achieving higher penetration rates may require significant investment in education and marketing.
Economic and Operational Costs: Increased operating expenses, including personnel costs, training, and IT-related costs, could pressure margins and profitability. Additionally, the company reported a net loss for 2025, reversing a net income from 2024.
Competitive Pressures: The company faces competition in the diagnostic testing market. Maintaining differentiation through clinical evidence and innovation is critical to sustaining growth.
Pipeline and M&A Execution Risks: The success of pipeline initiatives and M&A activities depends on effective execution and integration. Failure in these areas could impact long-term growth.
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Guidance & Outlook
2026 Revenue Guidance: The company anticipates generating total revenue of $340 million to $350 million in 2026, reflecting mid- to high-teens growth over 2025 when excluding DecisionDx-SCC and IDgenetix revenue.
Core Revenue Drivers: Continued growth is expected in the dermatologic and gastrointestinal franchises, driven primarily by TissueCypher momentum. DecisionDx-Melanoma is also expected to remain a durable growth driver in 2026.
AdvanceAD-Tx Test: The AdvanceAD-Tx test, launched in late 2025, is expected to contribute immaterial revenue in 2026, with material revenue contribution anticipated in 2027 or 2028. Reimbursement updates are expected in the second half of 2026.
GI Pipeline Development: The company plans to initiate and enroll the first patient for a GI pipeline test development study in Q2 2026, with preliminary data expected before the end of 2026. FDA clearance for the associated collection device is also anticipated in 2026.
SciBase Collaboration: The company expects to initiate a study using SciBase's EIS technology for atopic dermatitis flare prediction in Q2 2026, with preliminary data expected before the end of 2026.
Capital Expenditures: Capital expenditures are expected to decline in 2026 compared to 2025.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you elaborate on the takeaways from the recent NCCN update regarding DecisionDx-Melanoma and its potential inclusion in guidelines?
A:The U.S. standard for considering sentinel lymph node biopsy remains at 5%. DecisionDx-Melanoma data shows it can help avoid unnecessary procedures by predicting below 5% risk. However, the NCCN guidelines did not recommend DecisionDx-Melanoma or acknowledge its survival benefits, despite 58 peer-reviewed publications supporting its use. Only 11 of these were cited in the guidelines, leaving 47 studies unreviewed.
Q:What is the timeline for FDA approval of DecisionDx-Melanoma, and how will it impact payer discussions and test adoption?
A:The submission is being prepared as a de novo 510(k) submission, with potential clearance by late this year or early next year. FDA approval is expected to leverage state biomarker laws for reimbursement and reduce nonpayments from commercial insurance carriers, though it may not significantly change test volume uptake.
Q:What is the strategy for the sales team in promoting AD-Tx, and what has led to rapid KOL awareness?
A:The test was launched with limited access to 150 dermatological accounts, focusing on early adopters of gene expression profile testing. Over 500 orders were received within a few weeks, indicating high interest. The sales team remains focused on DecisionDx-Melanoma, with a gradual shift to include atopic dermatitis.
Q:What is the update on TissueCypher sales reps and their contribution to growth?
A:The TissueCypher sales team is expanding methodically as volume grows. The company aims to keep the dermatology and GI sales forces under 100 reps each, balancing growth and maintaining customer relationships.
Q:Is the company focusing on private equity roll-ups for TissueCypher, and how does this impact growth?
A:The company sees potential in private equity roll-ups and larger group practices for uniform treatment of Barrett's esophagus. While this strategy is being developed, current growth is primarily driven by individual clinicians adopting the test.
Q:What are the expectations for melanoma test volume growth in 2026?
A:Mid- to high single-digit volume growth is expected, with 32% patient penetration and 60% clinician usage. The company anticipates continued growth but at a slightly slower rate due to higher penetration levels.
Q:What is the split between dermatology and GI sales reps?
A:The company does not disclose exact numbers but aims to keep both sales forces under 100 reps. Dermatology sales reps were in the 70s, and TissueCypher sales reps were at 64 as of last year.
Q:What are the expectations for TissueCypher volume growth in 2026?
A:Continued strong growth is expected, driven by both new clinician adoption and further penetration within the existing base. The company has achieved 25-30% clinician penetration and 11% patient penetration.
Q:Should we expect quarter-over-quarter declines for DecisionDx-Melanoma volumes in Q1, and how will growth cadence look throughout 2026?
A:Q1 typically sees flat sequential growth due to seasonality, with a step-up in Q2 that remains durable through the year. Year-over-year growth may face tougher comps in the back half of 2026.
Q:What is the commercial strategy for the derm team if a positive draft LCD is published midyear for DecisionDx-SCC?
A:The company may fold SCC back into the sales bag and consider expanding the sales force to handle DecisionDx-Melanoma, AdvanceAD, and SCC. The strategy will depend on reimbursement timing and growth in AdvanceAD.
Q:When does NCCN typically update guidelines for SCC, and what new data was submitted?
A:NCCN updates guidelines annually, usually around May. The company submitted data on adjuvant radiation therapy responsiveness published in mid-2024, which missed the previous cutoff.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the timeline for FDA approval of DecisionDx-Melanoma, stating it was 'hard to say' when clearance might occur. They also provided vague responses regarding the impact of FDA approval on clinician adoption and payer discussions, suggesting limited evidence for substantial changes in test volume uptake.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AGA
AdvanceAD test
Biosciences Full
EIS
GI
PEN
SCC IDgenetix
SciBase
Tx
access
account
acquisition Previse
adenocarcinoma cancer
adoption
afternoon Biosciences
capital expenditure
class
collection device
commitment
compensation adjustment
contribution
core driver
core franchise
dedication employee
development
driver test
expenditure cash
flare
headcount compensation
income loss
mid
midterm
number test
phase
story
team
value creation
week availability
CSTL Transcript
Castle Biosciences, Inc. (CSTL) Q4 2025 Earnings Call Transcript
Unknown2-26
The earnings call highlights increased operating expenses and a net loss for 2025, contrasting with a previous net income. Adjusted EBITDA has significantly decreased, and there is uncertainty around FDA approval and NCCN guideline inclusion for key products. Despite strong market opportunities and revenue guidance, these financial concerns and vague management responses suggest a negative market reaction.
Castle Biosciences, Inc. (CSTL) Q3 2025 Earnings Call Transcript
Unknown11-3
The earnings call presents mixed signals: positive revenue growth and pipeline developments are countered by declining margins, increased expenses, and a net loss. The raised revenue guidance is a positive sign, but the lack of clarity on reimbursement pathways and flat SCC volumes temper enthusiasm. The Q&A reveals some analyst concerns, particularly regarding reimbursement and FDA approval impacts. The absence of a market cap limits prediction accuracy, but the overall sentiment leans towards neutral, given the balancing of positive growth prospects against financial pressures and uncertainties.
Castle Biosciences, Inc. (CSTL) Q2 2025 Earnings Call Transcript
Positive8-4
The earnings call summary and Q&A indicate positive sentiment, driven by raised revenue guidance, strong growth in TissueCypher and DecisionDx-Melanoma tests, and optimistic future cash flow expectations. Despite some uncertainties in FDA submission timelines and reimbursement pathways, the overall outlook is upbeat. The company's strategic initiatives and growth potential in the GI space further bolster confidence. The market is likely to react positively, with stock price expected to rise by 2% to 8% over the next two weeks.
Castle Biosciences, Inc. (CSTL) Q1 2025 Earnings Call Transcript
Unknown5-5
The earnings call presents mixed signals. Financial performance shows increased net loss and higher expenses, which are negative, but improved adjusted EBITDA is positive. The Q&A reveals cautious optimism with consistent growth for TissueCypher and strategic realignments. However, management's vague responses and lack of immediate revenue impact from acquisitions temper the outlook. The guidance for gross margins and revenue growth is moderate, with no major catalysts to significantly sway the stock price in either direction. Given these factors, a neutral stock price movement is expected over the next two weeks.
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