Guardant Health, Inc. Q3 2025 earnings call

Thank you. Earlier today, Guardant Health released financial results for the quarter ended September 30, 2025. Joining me today from Guardant are Helmy Eltoukhy, Co-CEO, AmirAli Talasaz, Co-CEO, and Mike Bell, Chief Financial Officer. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. Additional information regarding material risks and uncertainties, as well as the non-GAAP financial reconciliation to most directly comparable GAAP financial measures, are available in the press release Guardant issued today, as well as in our 10-K and other filings with the SEC.

Guardant disclaims any intention or obligation to update or revise financial projections and forward-looking statements, whether because of new information, future events, or otherwise, except as required by law. The information in this conference call is accurate only as of the live broadcast. With that, I would like to turn the call over to Helmy.

Thanks, Derek. Good afternoon, and thank you for joining our third quarter 2025 earnings call. Starting on slide three, Q3 was an exceptional quarter for Guardant Health, with broad-based growth across our business. Technology volumes grew 40% as year-over-year volume growth continued to accelerate, driven by Guardant360 Liquid, Guardant360 Tissue, and Reveal. Our biopharma business grew nicely year over year with positive CDx momentum, and screening volume accelerated with a sequential increase of 8,000 Shield tests. Importantly, screening has started to generate meaningful revenue, tracking at an annual run rate of approximately $100 million, roughly one year into the commercial launch of the FDA-approved product. Overall, we are very pleased with our performance this quarter, delivering 39% year-over-year revenue growth and crossing over $1 billion in annualized revenue for the first time.

Excluding screening, we reached a major milestone, with the rest of the business becoming cash flow positive one quarter earlier than expected. Indeed, this quarter sets us up very well to deliver on the long-term plan that we laid out at our investor day last month. Lastly, we recently surpassed 1 million cumulative clinical patients tested by Guardant Health, and as such, we want to highlight one of these patients with a story that captures the profound impact our tests are having in everyday clinical practice. A 67-year-old man had gone unscreened for colorectal cancer for several years, despite his physician offering colonoscopy or stool-based tests annually beginning in 2021. Each time, the patient declined to be screened. In December 2024, the physician ordered a Shield blood test, and the patient agreed to complete the blood draw during the same visit. The result came back positive.

When his physician explained that a positive Shield result required a follow-up colonoscopy, the patient agreed to have the procedure despite previously resisting. The colonoscopy was performed in January of 2025, revealing colorectal cancer. The patient quickly began treatment, and at his most recent follow-up, he had successfully completed therapy and was doing well. This is a powerful example of how the Shield blood test can remove barriers to screening, provide a more pleasant and convenient option for patients, and ultimately improve outcomes. Now turning to top-line performance in slide four, Q3 revenue grew 39% year over year to $265 million, with strong performance again across our oncology, screening, and biopharma and data businesses. Taking a closer look at our oncology business on slide five, oncology revenue increased 31% to $184 million, and oncology volumes increased 40% year over year to approximately 74,000 tests in the third quarter.

Turning to slide six, we have seen a clear acceleration in volume since July of last year, following the introduction of Guardant360 Liquid on our smart platform. Since then, we have launched two additional waves of applications, driving five consecutive quarters of accelerating volume growth, and we look forward to future waves of smart app introductions developed through the power of Infinity AI to help fuel future growth. In addition to Guardant360 Liquid, Guardant360 Tissue and Reveal volumes also experience strong year-over-year growth. Moving on to slide seven. As a reminder, our Infinity AI learning engine applies AI across our data treasury of over 1 million patient samples, including more than 350,000 epigenetic profiles across more than 100 tumor types, to bring powerful insights and new products to market faster than ever.

Infinity AI enables higher resolution mapping of tumor biology, giving rise to not only entirely new products in the clinical business, but novel signatures for faster drug discovery relevant to our biopharma business and new commercial insights and decision support tools. Turning to slide eight. To date, we've launched 15 groundbreaking smart apps on Guardant360 Liquid, with dozens more in development that will roll out across Guardant360 Liquid, Tissue, and Reveal. Each new application builds towards what we see as a GPS for cancer care, guiding physicians with the right insights at every step of the patient journey. We believe these applications not only significantly expand the clinical utility of Guardant360 Liquid, but further extend our technical leadership in the liquid CGP market. Looking more closely at some of the recent highlights within our oncology business on slide nine, Guardant360 volume grew exceptionally, with more than 30% year-over-year growth.

Guardant360 Tissue also had a great quarter, showing strong year-over-year acceleration following the major product upgrade released in the second quarter. Once again, Reveal contributed very nicely and continues to be our fastest growing oncology product. In addition to the strong performance, we recently reached a major milestone with the submission of our PMA application to the FDA for Guardant360 Liquid. This submission has the potential to streamline Guardant360 Liquid with a single flagship FDA-approved liquid biopsy for therapy selection, simplifying our portfolio, accelerating adoption, and further strengthening our leadership in this space. In addition, FDA approval would lay the foundation for ADLT designation, which is an important mechanism for capturing the appropriate value for our expanded test offering in the future.

We had a strong presence at ESMO 2025, with 15 abstracts spanning the cancer care continuum from MRD detection and recurrence monitoring with studies such as Pegasus to advanced stage tumor profiling and therapy response assessment. For Reveal, we're making great progress with data generation and publications. We recently submitted our immuno-oncology therapy monitoring data package to MolDX to support Medicare reimbursement and submitted data from our chemotherapy monitoring study for publication. Turning to slide 10 to take a closer look at our Reveal data pipeline. Over the last few months, we've made significant progress in MRD, generating and publishing compelling data across multiple cancer types. Earlier this year, we achieved Medicare coverage for CRC surveillance and have since submitted dossiers for breast surveillance and, as I just mentioned, for immuno-oncology therapy monitoring. We plan to submit packages for chemotherapy and CDK4/6 inhibitor monitoring following those publications.

Looking ahead, we have ongoing studies across more than five additional tumor types in both the adjuvant and surveillance settings. Together, this growing body of evidence will continue to strengthen the clinical utility and analytical validity of Reveal, supporting broader adoption in MRD. Turning now to slide 11, I'm proud of the progress we have made over the last few years in both driving demand and revenue growth across our portfolio. Looking ahead, we see multiple drivers across our oncology business that position us well for durable long-term growth. We will continue investing in commercial initiatives that make it easier for physicians to access our tests through portal enhancements, EMR integrations, and enhanced workflows. In our therapy selection business, transitioning to the smart platform unlocks wave after wave of novel applications, many unique to Guardant, that will help us differentiate and continue gaining market share.

In MRD, a redoubled commercial focus on Reveal, supported by significantly lower COGS and Medicare coverage for CRC surveillance, positions us for strong growth ahead. We're also excited to introduce an ultra-sensitive tissue-informed MRD assay that will complement our best-in-class tissue-free Reveal test. Looking more closely at some of the recent highlights within our biopharma and data business on slide 12, we delivered another strong quarter with third-quarter revenue growing 18% year over year. We continue to deepen our relationships with large pharma and had two additional companion diagnostic approvals in Q3. In late September, Guardant360 CDx received FDA approval as a companion diagnostic to Enluro for the treatment of ESR1 mutated advanced breast cancer. This marks the second FDA-approved indication in breast cancer and the sixth overall CDx claim approved by the FDA for Guardant360 CDx.

We also received regulatory approval in Japan for Guardant360 CDx as a companion diagnostic to Enhertu for non-small cell lung cancer patients with HER2 mutations. We now have 23 total CDx approvals across biomarker and tumor types. Our robust and growing pipeline of partnerships ensures that near-term revenue visibility remains high. With that, I will now turn the call over to AmirAli for an update on screening.

Thanks, Helmy. Moving on to slide 13, we delivered $24 million of Shield testing revenue in Q3, driven by approximately 24,000 tests. It's been incredibly rewarding to see Shield volume take off and hear story after story of patients positively impacted by this pioneering test, such as the story Helmy highlighted at the beginning of our call. Now, turning to slide 14 to take a closer look at screening highlights for the third quarter of 2025. Starting with CRC screening, given the strong performance and growing demand, we have accelerated the building out of our commercial infrastructure beyond our original plan. In addition, the breakthrough nature of the Shield brand has provided us with strategic partnership opportunities, including our recently announced collaborations with Quest Diagnostics and Path Group. Shield continues to generate strong demand from both patients and physicians with high adherence rates.

As exemplified by the patient's story we shared earlier, we are seeing Shield tests get completed with blood samples received for more than 90% of ordered cases. This demonstrates the simplicity of Shield as a routine blood test for CRC screening that can be implemented into routine PCP practice. We are encouraged by the performance of our Shield CRC V2, which demonstrated solid clinical performance with improved sensitivity for stage I colorectal cancer. Turning to our multicancer initiatives, we are very excited to announce that Shield Multicancer is now available nationwide through our clinical data collection initiative. At our investor day last month, we shared strong real-world performance data for Shield MCD from a study of 9,251 individuals. Specificity was 99%, consistent with earlier NCI findings, and positive predictive value was 41%, meaning that when Shield MCD is positive, there was a 41% likelihood of cancer being present.

Lastly, we are proud to partner with the American Cancer Society and look forward to ensuring that everyone has access to convenient and timely cancer screening so we can detect cancer earlier and provide opportunities for better outcomes. Taking a closer look at our recent strategic partnerships to scale our commercial infrastructure on slide 15. First, we were very excited to announce a strategic collaboration with Quest to expand and accelerate Shield access more broadly in the U.S. Quest's provider clients will be able to order Shield tests and receive results directly through the Quest connectivity system. We believe this strategic collaboration is valuable in two ways. First, it enables a better ordering experience and brings forward our nationwide EMR strategy by several years. This will give us immediate connectivity to 650,000 clinician and hospital accounts in the Quest system. We believe this accelerated connectivity will drive our scale.

We will also have access to deep logistical infrastructure, including 2,000 patient service centers and 6,000 in-office phlebotomists in the United States. Second, Quest's promotional activities using their nationwide field force, in combination with our own multi-hundred-person sales force, will further strengthen our competitive position in the primary care market. Quest's national commercial sales team will proactively educate primary care physicians and OBGYNs about the Shield test, accelerating awareness and adoption among their ordering providers. We expect Shield to be available for physician order through Quest in the first quarter of 2026. We will continue to process all Shield tests and control client services and billing and reimbursement operations. In addition, we recently announced our partnership with Path Group, which expands Shield's reach to more than 250 health systems across 25 states, representing another exciting accelerator for physician and patient access.

We are looking forward to seeing the positive impact of our growing commercial infrastructure in 2026 and years to come. We also remain confident in the potential inclusion of Shield in the American Cancer Society guidelines in the near future, which should be a catalyst for broader patient access. Moving on to slide 16, our goal has always been to detect many cancer types early when they are most treatable. With that in mind, we developed Shield as a multicancer detection platform. Turning to slide 17, and as I mentioned earlier, we have now broadened access to Shield multicancer detection. In order for a patient to access this result report, their physician will need to opt in to receive the multicancer report, and the patient will need to authorize the release of medical records to Guardant Health.

We successfully piloted this workflow in several accounts, and following overwhelming positive feedback from physicians and strong participation by patients, we expanded this offering nationwide. Moving on to slide 18, the launch of this initiative establishes a scalable platform for clinical data generation, enables assessment of the utilization of MCD results in patient care, and provides a new avenue to expand patient access to multicancer detection, bringing this important innovation to a broader population. This nationwide initiative is expected to reach hundreds of thousands of participants, making it one of the largest prospective evidence generation initiatives for early cancer detection. Turning now to slide 19, with the expansion of Shield to include MCD results together with patient authorization to release medical data, we are now well positioned to further strengthen our data modes.

This high-quality data serves as a regulatory-grade source of truth, providing details on each patient's cancer journey that were previously not accessible. We will generate large-scale prospective evidence about the performance, clinical value, and safety profile. We believe this high-resolution data will power continuous improvement of Shield MCD and also lay the foundation to potentially expand into multi-disease detection. With that, I will now turn the call over to Mike for more detail on our financials.

Thanks, AmirAli. Turning to slide 20, I'll now review select financial highlights for the quarter ended September 30, 2025. Unless otherwise noted, all growth rates are year over year. Total revenue for the third quarter grew 39% to $265.2 million, driven by strong performance across all three major revenue lines: oncology, biopharma and data, and screening. Oncology revenue increased 31% to $184.4 million, primarily driven by another quarter of accelerated test volume growth. We reported approximately 74,000 oncology tests in the third quarter, representing 40% growth, reflecting continued positive momentum across the portfolio. Guardant360 Liquid delivered its fifth consecutive quarter of accelerating growth, with volumes up more than 30%, supported by the expanding clinical utility enabled by smart apps launched over the past year. Guardant360 Tissue also had an exceptional quarter, showing strong year-over-year acceleration following the major product upgrade released in the second quarter.

Reveal remains our fastest growing oncology product, benefiting from CRC surveillance reimbursement achieved early this year and continued strength across both breast and lung cancer indications. As a reminder, we do not include Guardant hereditary cancer testing or IHC volumes in our reported totals. We continue to expect minimal revenue contribution from these new offerings through 2025. Average selling prices remain stable compared to the prior quarter. Guardant360 Liquid was in the range of $3,000-$3,100. Guardant360 Tissue was approximately $2,000, and Reveal was in the range of $600 to $700. We also recognized approximately $5 million of out-of-period oncology revenue in the third quarter, compared to $12 million in the prior year period. Our biopharma and data business continued to perform well, with revenue increasing 18% to $54.7 million, which includes milestone revenue from two companion diagnostic approvals achieved during the quarter.

The biopharma pipeline remains solid, providing confidence in both the near-term and long-term growth prospects. Screening revenue from Shield totaled $24.1 million, generated from 24,000 tests reported during the quarter. Shield ASP was approximately $880 above expectations, reflecting our continued focus on Medicare-covered patients. We also recognized approximately $3 million of out-of-period screening revenue, driven by better-than-expected reimbursement from Medicare Advantage payers for tests performed in the first half of 2025. This positive trend reinforces our confidence in both near-term and long-term expectations for Medicare Advantage reimbursement rates and overall Shield ASP targets. Turning to slide 21, we're very pleased with the year-over-year improvement in non-GAAP gross margin, which increased to 66% in Q3 2025, compared to 63% in the prior year period.

This improvement was primarily driven by a significant reduction in Reveal COGS, which have declined from over $1,000 per test in Q3 2024 to less than $500 per test, as well as strong progress in Shield gross margin. Shield's non-GAAP gross margin improved from negative levels at the launch just over a year ago to 55% in the third quarter of 2025. This improvement reflects strong ASPs under the Medicare ADLT rate of $1,495, disciplined focus on reimbursable tests, and continued COGS reduction. Shield's non-GAAP cost per test again trended lower sequentially and continues to be below $500 per test, consistent with our operational plan. These gains reflect the ongoing benefits of increased Shield volume and disciplined cost management. Turning to slide 22, non-GAAP operating expenses were $228.8 million in the third quarter, an increase of 22% in line with expectations.

The increase was primarily driven by continued investments to expand our screening commercial infrastructure and scale sales and marketing for Shield. As we conclude 2025 and enter 2026, we'll maintain focus on these investments to maximize our first mover advantage in blood-based colorectal cancer screening. Adjusted EBITDA loss was $45.5 million, an improvement of $10.7 million compared to a loss of $56.2 million in the third quarter of 2024. We remain disciplined in our approach to cash management. Free cash flow burn was $45.8 million, improving by $9.5 million compared to the prior year period. Importantly, excluding the screening business, Guardant Health generated positive free cash flow during the quarter, a significant milestone achieved one quarter ahead of our stated target. We expect the core business to remain free cash flow positive in the fourth quarter, as well as for the full year 2026 and beyond.

We ended the quarter with approximately $690 million in cash, cash equivalents, and restricted cash. Turning to the full year 2025 outlook on slide 23. Based on our strong year-to-date performance, we are raising full year 2025 revenue guidance for the third time this year to a range of $965-$970 million, representing approximately a 31% growth compared to 2024. At the midpoint, this represents an increase of $47.5 million versus our prior range. We now expect oncology revenue to grow approximately 25% year over year, up from prior guidance of 20%, driven by stronger than expected oncology volumes in the third quarter and higher expected volumes for the remainder of the year. We now forecast total oncology test volume to grow more than 30% compared to our previous expectation of greater than 27%.

Our biopharma and data business remains on track to deliver mid-teens growth for the full year. We're also increasing our Shield revenue guidance to $71 million-$73 million, up from $55 million-$60 million, reflecting higher expected volume of 80,000 tests-82,000 tests compared to prior guidance of 68,000 tests-73,000 tests. With continued improvement in gross margins, we're raising our full year non-GAAP gross margin guidance to 64%-65%, up from 63%-64%. As previously outlined, we plan to reinvest incremental screening gross profit to accelerate commercial expansion. Accordingly, we now expect 2025 non-GAAP operating expenses to be in the range of $865 million-$875 million, representing a 14%-16% increase compared to 2024. Finally, consistent with our long-term financial roadmap, we remain committed to reducing cash burn each year and achieving company-wide cash flow breakeven by the end of 2027.

For full year 2025, we continue to expect free cash flow burn of $225 million-$235 million and improvement from $275 million in 2024. Turning to slide 24, we began 2025 with an ambitious set of strategic and operational objectives. Through our strong execution, we've delivered on nearly all of them, and we expect continued momentum as we close out the year. Our progress this quarter positions Guardant Health for sustained success in 2026, with continued oncology volume growth and strong Shield adoption. With that, we'll now open the call for questions.