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Q1 2026 Earnings Call
2026-05-07Operator: Good afternoon, everyone, and welcome to the Caris Life Sciences Q1 2026 Earnings Call. My name is Steven, and I will be your coordinator today. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand it over to Russ Denton at Caris. Please go ahead.
J. Denton: Thank you. Earlier today, Caris Life Sciences released financial results for the quarter ended March 31, 2026. Joining from Caris today are David Dean Halbert, our Founder, Chairman and CEO; David Spetzler, our President; Brian Brille, our Vice Chairman and EVP; Bobby Hill, our Chief Commercial Officer; and Luke Power, our CFO. 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. These risks are discussed in our SEC filings, including our annual report on Form 10-K filed with the SEC. Except as required by law, Caris disclaims any intention or obligation to update or revise financial projections and forward-looking statements whether because of new information, future events or otherwise. The information discussed in this conference call is accurate only as of the live broadcast. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the press release Caris issued today. A copy of today's presentation materials can be found on our Investor Relations website. I will now turn the call over to Brian.
Brian Brille: Thanks, Russ, and thank you all for joining our first quarter 2026 earnings call. This is a strong start to the year, and we're pleased to report continued growth, profitability and cash generation, which will continue to support our investment strategy focused on MCED launch, the broader product pipeline and commercial platform expansion. As illustrated on Slide 3, our platform continues to expand across technology, scale and commercial breadth. We are now supporting more than 6,100 ordering oncologists with approximately 70% of orders coming through our EHR and portal channels. In the first quarter, we completed 52,800 cases, up 15% year-over-year. We're very excited about the initiatives that our CCO, Bobby Hill, is driving, and we began to see the benefits of these in February and March. With this clinical activity, our data set has surpassed 1.07 million profiled cases, including more than 677,000 whole exomes, 728,000 whole transcriptomes and roughly 790,000 match profiles. We also reached another important milestone with the recent addition of the 100th Precision Oncology Alliance member, UC San Francisco. We've launched 2 exciting products, Caris ChromoSeq and Caris MI Clarity. ChromoSeq is a therapy selection assay for hematological cancers, which expands the breadth of our offerings and features a cutting-edge whole genome technology. ChromoSeq was launched on April 1. In addition, we launched Caris MI Clarity, an exciting prognostic test designed to deliver insight into both early and late distant recurrence risk for breast cancer by digital pathology. Finally, and importantly, we're making progress with Caris Detect multi-cancer early detection, and we're getting ready for commercial launch with Everlywell with plans to add additional channel partners. Our philosophy is a long-term strategic orientation to develop the best offerings on the market and to pursue this innovation while generating profitable growth and maintaining financial strength. We had a strong first quarter with total revenues increasing 79% year-over-year to $216 million. As demonstrated on Slide 4, this result was driven primarily by strong performance from clinical profiling. Molecular profiling services revenues increased to $211 million in the first quarter, representing an increase of 85% year-over-year. In summary, across the board, we had a very productive first quarter, illustrated by the quarter highlights on Slide 5. This strong revenue performance, combined with the operating leverage inherent in our business model has produced continued positive financial results while we ramp up investments, including revenue growth of 79%, which was driven by volume growth of 15% and a 61% increase in clinical ASP. This revenue growth has led to improved gross margins of 65% on a GAAP basis, up from 47% in the first quarter last year. We've invested significantly this quarter while maintaining financial discipline. This approach has produced positive adjusted EBITDA of $26 million as well as positive free cash flow of $22.5 million. This is our fourth straight quarter of positive adjusted EBITDA and positive free cash flow and provides us with valuable strategic flexibility for ongoing investment in our tech platform for new products as well as the ability to develop new channels such as MCED. In addition, our balance sheet continues to strengthen with cash on hand growing to slightly above $825 million, an increase of $23.4 million in the quarter. Finally, as a result of this profitability profile, we were able to attractively refinance our credit facility. The new $400 million debt facility led by Blue Owl and Blackstone offers many advantages, lower costs, saving approximately $6 million in annual interest, an extension of maturity date 3 years from January 2028 to April 2031 and a committed delayed draw term loan of $300 million on the same terms for any potential strategic acquisition. We believe that our financial performance gives us unique strategic flexibility, which supported our investment program in the first quarter. We're continuing to invest in our product pipeline, importantly, in our MCED business, which Dr. Spetzler will describe in detail as well as the expansion plan for our sales organization. We believe that our commercial channel is highly differentiated and has many strategic edges. Bobby Hill is bringing enhanced discipline and alignment to the overall platform. We're committing new resources to expand the commercial footprint with important hires across the platform, expanding the number of territories covered and building product-focused sales teams. As stated previously, our strategy is to maintain financial discipline through a strong balance sheet and profitability. These financial pillars of strength will allow us to realize our mission of making precision medicine a reality to benefit patients and support physicians. I'll now turn the presentation over to Bobby to provide an update on our commercial business and related strategic initiatives. Bobby?
Robert Hill: Thanks, Brian. I will provide a brief update on our molecular profiling business, along with our progress on the initiatives for the commercial teams in 2026. On Slide 6, this shows our strong molecular profiling revenues performance for this quarter. with revenues increasing 85% to $211 million. This revenue growth was driven by a 15% year-over-year growth in clinical case volumes to approximately 52,800 profiles and a 61% increase in ASP for our comprehensive profiling tests, reflecting our market access and billing teams' continued excellent execution. We continue to see the benefits of ASP driven by our successful launch of MI Cancer Seek last year, and these benefits are reflected on the slide. Our tissue ASP increased by 70% to over $4,300 and our blood ASP increased by 14% to just under $2,500, driven by billing, our PLA code and improved payment for Caris Assure. Luke will discuss the breakdown of this further during the financial update. Moving on to Slide 7, I'll spend a minute on the commercial changes we made at the beginning of the quarter and why we feel good about the trajectory coming out of the quarter. We completed the realignment of the sales teams in January 2026. That included expanding our territory structure from 82 to 146 territories and continuing to build out the field organization. We made those changes deliberately to improve coverage, sharpen accountability and create a stronger footprint for execution across both MI Cancer Seek and Caris Assure, along with setting us up well for product launches. January was a transition month. As expected, given the scale of the realignment and expansion and following the realignment, activations in February and March grew approximately 20% year-over-year compared with the same 2 months period last year. And full quarter activations increased 17% year-over-year. That reinforces our confidence in the underlying demand trajectory and based on the completion cadence in February and March, supports a quarterly exit run rate of roughly 56,000 completed cases. For Q1 overall, we completed approximately 52,800 therapy selection cases, up 15% year-over-year, including approximately 43,600 tissue cases and approximately 9,200 Caris Assure cases. The key point is that demand accelerated as the quarter progressed due to the great work of the sales team, while completed case recognition reflected normal timing between activation and completion. Beyond overall volume, the broader commercial engine continued to perform well. Caris Assure volume grew 58% year-over-year. More than 70% of orders were submitted electronically. Over 3,000 physicians are using EMR integrations, and we ended the quarter with more than 270 commercial team members as we continue building toward our approximately 300-person goal. So overall, we feel very good about how the team has performed with the initiatives. And I'll now turn it over to Dr Spetzler to continue our progress on our product pipeline, in particular, around Caris Detect. Spetz?
David Spetzler: Thanks, Bobby. I wanted to start with an important milestone for the quarter for Caris, which is the final readout for Achieve 1 for Caris Detect described on Slide 8. At the high level, these data points serve as our CLIA validation of the clinical accuracy study and reinforce our conviction that our whole genome solutions -- our whole genome sequencing approach to early detection is fundamentally differentiated. In the Achieve 1 data, Caris Detect delivered a 60.3% Stage I and Stage II Sensitivity with a 99.2% asymptomatic specificity across 3,014 subject high-risk cohort. This is a meaningful result in early detection, particularly when you consider both the size of these evaluable cohorts and the complexity of the underlying biology we are trying to detect. What gives us confidence in these results is not just the top line numbers, but the platform underneath them. Caris Detect is built on the foundation of Caris molecular profiling data, which now includes more than 1 million processed cases and over 50 billion molecular markers. That breadth and depth of data matters. It is what allows our AI models to identify difficult to detect biological signals associated with early-stage cancer with the level of resolution that we believe is differentiated in the field. When you look at performance by stage, the pattern is exactly what you would see in a high-performing assay. Sensitivity increases consistently with stage: 56.8% in Stage I, 67.7% in Stage II, 79% in Stage III and 98.6% in Stage IV. We also reported 96% benign tumor and high-risk patient specificity alongside the 99.2% asymptomatic specificity results. We split the population of patients without cancer into 2 different groups, because a false positive in a patient with a benign tumor or precancerous lesion should have a very different implication than a false positive in a healthy person. Taken together, those data show a strong balance between sensitivity and specificity across clinically relevant populations. Importantly, the cancer type readouts were also encouraging. In the total Stage I and II data sets, we saw a sensitivity of 53.7% in breast, 74.1% in prostate, 73.4% in lung, 60.6% in uterus, 61.8% in bowel, 81.3% in head & neck, and 70% in pancreatic cancer. And maybe the most important strategic point on this slide is that these results were generated using only 1 of 9 potential pillars. In other words, we believe there is still room to improve from here as additional pillars may further strengthen overall performance over time. So when we look at Achieve 1, we do not just see a successful data readout; we see proof that the biological foundation is working and a platform that still has meaningful upside ahead of it. We have been doing a beta launch in the last few weeks and still anticipate commercial launch later in Q1 with Everlywell. Moving to Slide 9, this also reflects the status of our robust pipeline. And I'll touch on these before letting Luke wrap up with the financials. First, as Brian mentioned, Caris ChromoSeq is now launched for the MolDX coverage. This is the whole-genome heme therapy selection solution designed for AML, MDS, MPN and suspected myeloid malignancies. The assay is differentiated by greater than 200x depth of coverage across the whole genome, the ability to detect the full range of clinically relevant genomic alterations and approximately 1.6 billion reads per patient. Second, we have also launched the Digital AI only version of Caris MI Clarity. Caris MI Clarity is designed for both menopausal patients with (sic) ER-positive, HER2-negative node-negative early-stage breast cancer at the time of diagnosis. We see this as an important extension of our platform into recurrence risk assessment designed to support better decision-making and reduce unnecessary therapy. Third, in MRD tumor-naive, we continue to focus on colorectal cancer. This solution uses the Caris Assure platform as tumor-naive by its design as an intended to support minimal residual disease detection from the whole blood sample. We are currently compiling additional data for the MolDX technical assessment. And fourth, in MRD tumor-informed, development and launch planning have made progress. This is a pan-tumor opportunity intended for Stage I, II and III disease. It uses tumor-normal whole genome sequencing to identify trackers with a proprietary approach designed to minimize false negatives and maximize tracker count to achieve ultra-low sensitivity. And finally, before wrapping up, I also want to provide an update on Caris Assure. We recently completed our submission to New York State, and we will provide an update to everyone once we hear back on that submission. We had a very productive few months so far in 2026 with the newly launched solutions and are continuing to generate additional data and multiple avenues to extend the same molecular and AI foundation across therapy selection, risk recurrence, early detection and MRD. With that, I will turn it over to Luke for the financial updates.
Luke Power: Thanks, David. Turning to Slide 10. We delivered another strong quarter financially with total revenue of $216 million, up 79% year-over-year. The main driver remains molecular profiling, which grew 85% versus Q1 of last year, and that was on continued ASP improvement and volume growth. Therapy collection completed volume was up 15% in the quarter. And as Bobby discussed, we were very pleased with how we exited the quarter. While completed cases came in modestly below our initial expectations due to timing, as discussed, activations improved sequentially for the quarter for both tissue and blood following the January realignment. And that stronger case intake we saw exiting the quarter gives us great confidence in the Q2 and the balance of the year. Turning to Pharma and Research revenue, this was $5.4 million versus Q1 2025 revenue of $6.8 million, and was due to the deliverable movement of our discovery and data businesses under contract, which will flow through over the balance of the year and is supported by improved contract activity. Overall, our revenue continued to translate into a strong bottom line with positive adjusted EBITDA and positive free cash flow for the fourth consecutive quarter, reflecting the disciplined approach we continue to take as we invest in the business. As I stated on the last earnings call, we intend to utilize this financial strength to fund the pipeline and the commercial investments throughout 2026. And you can start to see that in the numbers. Operating expenses were $136 million in Q1, up from $132 million in Q4. Purchases of property and equipment were just over $10 million, up from $5.1 million in Q4. That is as we continue to prepare for pipeline launches, including early detection, while still delivering positive adjusted EBITDA of $26 million in the quarter and positive free cash flow of $23 million in the quarter, which also include our annual bonus payments of $30.5 million. Turning to Slide 11. Q1 continued to validate the strength of our molecular profiling business with molecular profiling revenue being $211 million in the quarter, up 85% versus Q1 of last year. Reported revenue and ASP continued to benefit from favorable collections across both MI Profile and Caris Assure. And as this chart on the right shows, we have seen a meaningful buildup in the underlying revenue base over the last several quarters, with additional upside where collections have exceeded prior accrual assumptions as we continue to have collection success from the excellent work by our billing and market access teams. At the assay level, MI profile-based ASP was $4,091 in Q1 and Caris Assure base ASP was (sic) $2,421 showing the benefit from payer contract in progress and stronger collection experience. With regards to our ASP, I also want to spend a minute on reimbursement framework because there has been a little confusion on this point recently. For us, both assays are CDLTs and not ADLTs. That means these are reported under PAMA, and the 2026 PAMA reporting window runs from May 1 through July 31, based on data from January 1 through June 30, 2025, with any related fee schedule update becoming effective January 1, 2027. As an update, we submitted our PAMA data on May 1 and do not expect any downward adjustments from that. We also continue to support the broader CRUSH efforts and do not view that as changing our underlying reimbursement position. Turning to Slide 12, this highlights the key commercial and reimbursement tailwinds supporting the business in Q1, and that is demonstrated by our approach of always focusing on the technology first. Starting with MI Profile, we continue to benefit from MI Cancer Seek and the steady improvement we have seen through 2025 into Q1 of 2026. That progress has been supported by our contracting and payer collection experience as demonstrated on the previous slide. At this point, we're above $225 million covered lives for MI Cancer Seek, which we expect to continue to increase throughout the course of this year, and the assay represented more than 75% of our tissue volume in Q1. As touched on before, we also delivered about 9% completed volume growth in MI Profile in the quarter compared to Q1 of 2025, including a record February and March period following the sales realignment that also drove stronger sequential activations versus Q4, and it's due to the great work done by our sales team following the realignment. And that momentum will flow into Q2. On the Caris Assure side, this came in line with our expectations with Assure's volume growing 58% year-over-year. And importantly, volume also increased 7% sequentially. So we continue to see traction in blood as we grow our penetration there with a differentiated solution. This continued leverage resulted in molecular profiling services gross margin being 65% in Q1, compared with 47% in Q1 of last year, which is an improvement of over 1,800 basis points year-over-year. And finally, moving to guidance on Slide 13. You can see we're reaffirming our guide from February, and I'll address 2 key components on this prior to opening up the call the questions. Starting with volume. Based on the February and March end, we remain confident that the full year volume framework. We continue to expect tissue growth in the low teens and blood growth in the high 50s to low 60s. The stronger activation trend exiting Q1 supports our guide view and that timing gap between activations and completed cases should normalize as we move into Q2 and throughout the year with the realignment completed. With respect to the pipeline, we have launched Caris ChromoSeq, which was approved by MolDX priced at $3,228 and also MI Clarity. After Q2, we will evaluate and incorporate the contribution from those launches along with any incremental impact from our continued sales strategies and commercial expansions. On revenue, while Q1 performance points us towards the higher end of the range with a beat on our expectations for the quarter, we are reconfirming guidance today, and we'll evaluate after Q2 with the additional history of the new launches and the continued execution. I will stop there and turn it back over to the operator for questions. Operator?
Operator: [Operator Instructions] Our first question comes from the line of Michael Ryskin of Bank of America.
Alexa Chan: This is Alexa Chan on for Mike. I just have a couple of ones here. Maybe to start, can you talk about the impact that the sales realignment might have had on tissue volumes this quarter? And then as a follow-up, can you discuss your confidence in achieving the 20% volume growth target for the year given the softer start? And we appreciate that the sales force was realigned and that trend improved in February and March, but it still appears to require a significant ramp from here.
Robert Hill: Yes, as we -- any time when you realign a sales organization and put them into new territories, we saw a little bit slower start to the very beginning of the year. The beginning of the year sometimes is lower, so that's why we chose to do it then. But what we saw with tissue volume each month after that. And what we -- and what we're trending at, we feel confident that we're going to achieve 20% year-over-year by the end of Q4.
J. Denton: Yes. And one of the reasons why we also disclosed kind of the exit rate on the completions for February and March is what also gives us confidence. You can see based on those numbers, like we've improved dramatically on the tissue front from where we were running on a monthly rate last year with over 15,500 for kind of on average for February and March. So we believe that continued trend is going to benefit us as we go into Q2. So we feel good about the low teens guidance.
Operator: Our next question comes from the line of William Ruby of TD Cowen.
William Ruby: First question is just on the clinical volumes in the first quarter. Did weather hold back to clinical volumes at all? And if so, by how much?
J. Denton: No. So like the reason why we pointed out, we've gotten the cases in the door, so what we expect to happen and the reason why we're reaffirming that guide from a volume standpoint is what you'll see now is an improvement in the sequential growth from Q1 to Q2 that we were initially expecting kind of a 7% growth sequentially from Q1 to Q2. Now that's going to be 10%. So those cases will flow through in the second quarter, and it will be caught up by the end of the second quarter as we progress into the second half of the year.
William Ruby: Got it. And then if you could just discuss kind of the traction in blood testing. What's been the strategy impact? And where are you having the most success in types of accounts? And just up on that, please?
Robert Hill: Yes. We've expanded in -- before Q1, our liquid product specialist team. A bunch of individuals that are highly skilled at helping the appropriate patients get blood testing. We saw 135% growth in their targets quarter-over-quarter. And because of that quarter-over-quarter growth, we've also said that we're going to double the size of that team again in Q2. Tissue profiling was our base business, and now we're getting good at selling blood profiling. And so for the right patients, we'll continue to do that, take those learnings to the rest of the sales force.
David Spetzler: Probably also worth saying, the version of Assure that we submitted to New York State significantly increases the amount of RNA profiling that we're doing, going up to about 600 million reads from 5 million reads.
Operator: Our next question comes from the line of Vijay Kumar of Evercore.
Vijay Kumar: Maybe first one on a big picture question, if you will. I think, Luke, you brought up the CRUSH initiative. Space has been under pressure. Investors are nervous about reimbursement in the space. Just talk as high level, is there a rest of the space on the reimbursement front? And if so, how is Caris differentiate it from other peers in the space when it comes to reimbursement?
Luke Power: Yes. It's the reason why we wanted to call it out in our scripts is there's been some confusion. What we've managed to do is it's a little unique in that we managed to go through and we went through the CDLT process. So our codes are like CDLT, not ADLT. So we actually feel very good and we actually submitted our PAMA submission last week based on the time frame. So we feel good about it. I don't feel like there's already mechanisms in place outside of CRUSH for pricing review. And PAMA is obviously the key one for us. And based on our submission, we feel really good about our pricing. As I said, we don't expect any downward adjustments from that. So we feel good about the initiatives. We're supportive of CRUSH, obviously. We've been at this a very long time, and we kind of firmly believe and are -- that we are pretty set from a pricing standpoint.
Vijay Kumar: Just to be clear, on that point, are you trying to make a distinction between CDLT and ADLT and maybe CDLT is having more visibility on the pricing element if there's any rest of the space?
Robert Hill: Yes. I think the -- how we price both MI Cancer Seek's PLA code and Caris Assure's PLA codes not go through the ADLT pathway. And so those were priced, MI Cancer Seek through Crosswalk, and Caris Assure through Gapfill. And then we are subject because we did not do ADLT to the 3-year PAMA cycle that's going through it. And as Luke said, we put our data and PAMA on May 1, and we feel very good about price stability.
Vijay Kumar: That's helpful. Then maybe, Luke, one on the guidance comment you made here on Q-on-Q 10%. Was it a volume comment or a revenue comment? And if you could just clarify what was true-ups in Q1? What was underlying gross margins ex true-ups? And how should we think about gross margin progression?
Luke Power: Yes. Gross margin came in exactly in line with what our expectations was, in the kind of mid-60s. Again, our focus right now this year is more on the investment side. I think as we progress into later on this year and into next year, we'll start focusing more on improving the margin standpoint. So generally, it came right in line with our expectations were from the gross margin standpoint. From a true-up standpoint, again, that was very minimal compared to what we've seen last year. We continue to execute and continue to appeal on the reimbursement front and continue to have success. So it was a very small percentage compared to what you saw in Q4. But as we progress throughout 2026, as I stated previously, those will start getting smaller and smaller as we continue to have the uptick in the overlying ASP.
Vijay Kumar: Understood. And sorry, and the 10%, was it volume or revenues?
Luke Power: So that's from a volume standpoint. So the way we were thinking about it is that 2.5% that will flow from Q1 will flow into Q2 from a completed standpoint. The cases came in the door in Q1, but it will be completed in Q2. So what our expectation is now for Q2 is, over 58,000 cases, which would be a 10% sequential growth from Q1.
Operator: Our next question comes from the line of Subbu Nambi of Guggenheim.
Ricki Levitus: This is Ricki on for Subbu. Maybe one for Bobby. You ended the quarter with, I think it said over 270 sales reps, and earlier in the year you said you would increase head count by 20% to 25%. So it sounds like you still have more reps left to hire. Could you give us some color on how that hiring is progressing and also on how the 20 or so new reps that you've brought on year-to-date have been ramping up?
Robert Hill: Yes, we're progressing right on track of where we want to be. We changed territory size -- or territories and made them smaller. So we went from 82 to 146 territories. We'll continue to grow that amount. We have the first wave hired. We're sending them through training. They're already out making calls. And we've significantly revamped our training program. We're excited with that development, and so yes, we're on track to hit that 300 number and hire them all in Q2, approximately 300 number, and we feel very good about the ramp-up and what we've changed.
Operator: Our next question comes from the line of Casey Woodring of JPMorgan.
Unknown Analyst: This is Martha [indiscernible] on for Casey. Apologies if I missed this, but how should we think about 2Q volumes for tissue and blood, any color you can share there? And then also on the pharma R&D revenues? And then another one would be on the initial MCED test uptake, are you seeing any contribution this year?
J. Denton: Yes. I can definitely take that. So as we just kind of just stated, our expectation is for a 10% sequential improvement from Q1 to Q2 in volume. That would get you above 58,000 cases, which, again, we feel very good about based on what we saw exiting the quarter. And then from a blood and tissue standpoint, you will see those tissue cases flow into Q2. So we would expect to be in the 47,500 cases for tissue and then approaching over the -- we feel very confident about those for Q2. And then from a revenue standpoint for Q2, our expectations right now based on the initial guide that we put out in February was for that kind of 32% growth in overall total revenue. And then the last question, contribution from Caris Detect. Again, we'll assess that. Our plan is to still launch that in Q2, that we're progressing along very nicely. And then I'll assess that as we get into the Q2 earnings on what the contribution is going to be for the second half of the year.
Operator: Our next question comes from the line of Patrick Donnelly of Citi.
Unknown Analyst: This is [indiscernible] on for Patrick here. Just curious on the profitability side for both 2Q and for the year. I think you previously had noted a certain range -- a certain cap for the EBITDA profitability, and it's been since updated to positive. But just curious what you can share with us on both the EBITDA assumption for 2Q? And then for the full year, I know you have some investments in there, and maybe perhaps share with us what those are as well.
Luke Power: Yes. So from an EBITDA standpoint -- from a free cash flow standpoint, I'll repeat what I kind of stated on the last earnings call. We're going to utilize the kind of financial profile we have. So we're going to get that pretty close to neutral from a free cash flow standpoint in Q2. One of the key things that we're going to push on is with the early detection launch, there's going to be an increase in Q2 from a CapEx standpoint. We're expecting about $30 million of CapEx, of property and equipment purchases. Again, that includes the NovaSeq Xs that we're ramping up. We've also started to ramp up from an inventory purchase standpoint ahead of the detection launch. So you're going to have additional spend from that standpoint. So our goal going into Q2 is to utilize, obviously, the free cash flow that we're generating to fund the preparation for Detect launch, along with pushing, obviously, MI Clarity on Caris ChromoSeq as well. Then from an EBITDA standpoint, we're not guiding to that metric because, again, the key focus for us is pushing the pipeline through, pushing through the commercial activities that Bobby is putting in place and along with getting the Detect product launch. So from an estimate stand line for Q2, we have the 32% growth for revenue and then expect a mid gross margin of 65%, is where we expect gross margin. And we'll also ramp up our OpEx as well from where we were at $136 million to over $140 million. So again, that will get you a small EBITDA, but it's not our primary focus for Q2.
Unknown Analyst: Got it. That's super helpful. And just one more on -- well, first, congrats on the pipeline coming out here. It's great to see launches and reimbursement coming through. And just curious on the MRD front, I think you mentioned on the update -- on the prepared remarks, that it's still in prepared for being launched. I'm just curious what that priority is, MRD exactly, what is that priority in the pipeline for you guys? Is that something that you guys have put emphasis on and aiming to launch perhaps late this year or sometime next year? Or what can you share with us on the MRD and time line front, please?
David Spetzler: Now that we have these other product launches done and behind us, MRD is the next priority. So we'll be focusing on that quite heavily.
Operator: Our next question comes from the line of Mark Massaro of BTIG.
Mark Massaro: I wanted to start on a pipeline question. Now that you have MolDX approval for ChromoSeq and it's launched, can you speak to the unmet need? I think oftentimes, there's a whole lot of conversation about solid tumor profiling. But can you just sort of speak to the unmet need in myeloid?
David Spetzler: Sure. So what happens today is that those patients get a whole lot of small channel tests, a combination of different technologies. And so it's not comprehensive and they often miss things. Those tests are also not designed to pick up resistance components. And so with our approach, we're able to, in one fell swoop, not only identify all of the components that allow optimal therapy selection, but also identifying when that therapy is no longer effective. So it's a truly comprehensive approach to hematological malignancies, and that's a hotspot that is being done today.
Robert Hill: And with the turnaround time that the team was able to achieve and what we're seeing from the launch, that gets patients a complete answer faster than they would get we're testing with multiple different tests trying to chase down a diagnosis.
Mark Massaro: Okay. That's helpful. I know that breast cancer is one of the important indications in your early detection initiatives. Can you just speak to that disease state relative to others? How should we think about the landscape progressing over time as you guys think about screening for various cancer types?
David Spetzler: Yes. So I mean breast cancer is one of the more common types of cancer. It's already highly screened for. And mammography has its limitations, and so it's important to us to make sure that we're servicing that patient population really, really well. The performance that we have shown in Achieve 1 is already superior to mammography. And so it's inevitable that older technologies are going to be replaced by future superior technologies, and that's what's happening right now.
Operator: Our next question comes from the line of Evie Koslosky of Goldman Sachs.
Elizabeth Koslosky: So I wanted to ask on the quarterly run rate you gave for February and March of 56,000 tests relative to the 52,800 you reported for the quarter. I think you said that's up 20% year-over-year relative to February and March last year. I guess, could you talk through the split between tissue and blood? And then how durable you think the acceleration in volumes is post the sales force realignment? And was there a level of pent-up demand in the latter half of the quarter?
Robert Hill: Yes. The split follows our normal split growth when we went from January into February and March. So we saw ramp-ups in both products. And we're excited about what that was able to do and the quickness of that turnaround. As we look at that volume, as Luke has discussed, going into Q2, we still feel very confident that we'll be able to achieve the numbers that we've set forth for guidance, and we expect both products to continue their growth.
Elizabeth Koslosky: Great. And then any update on the M&A and kind of capital allocation strategy? I mean I know there's a focus kind of to reinvest more organically, but any specific areas or gaps in your portfolio that you would look to fill inorganically?
Brian Brille: Evie, it's Brian. I don't -- there's no gaps. And we've been a pioneer through organic growth and building our technology platform. So there's nothing in particular that we think we need. On the other hand, we're very strong with respect to our financial profile, our new debt facility gives us additional flexibility. So we're definitely in a position of being flexible and tactical if we see the need.
Operator: Our next question comes from the line of Tycho Peterson of Jefferies.
Noah Kava: This is Noah on for Tycho. I wanted to start by asking about the pharma R&D business. I think it came in a few million dollars light of consensus expectations on revenue. How are you thinking about the commercial investment in that business? Can you speak to orders or backlog performance that justifies maintaining the guide here?
Luke Power: Yes. So as we kind of stated on the last earnings call, you always have Q1 and Q3 are always kind of the lower quarters from a pharma standpoint. It's just a natural cadence that we progressed through throughout the year. So the revenue, the reason why we're maintaining the guidance is that revenue delta from the Q1 expectation, it's based on contracts we already have under contract. So the Genentech deal that we publicly disclosed, there's revenue dollars that moved from Q1 that will flow into Q2. And the same with some of our data partners that we have under contract that will deliver that data in the next quarter or 2. So we feel good about that. And we do expect from a Q2 standpoint to obviously see that increase that we've seen over the last couple of years where Q1 is always lower and Q2 ramps up, Q3 comes down and Q4 ramps up. So we feel confident right now based on that -- the existing guidance playing out.
Noah Kava: Okay. That's helpful. And I wanted to ask one more. I know a competitor had a recent study that went to ODAC for liquid biopsy informed drug trial that ODAC voted against. How are you thinking about implications for serialized liquid biopsy testing? And do you have any embedded assumptions for liquid testing, test per patient expanding in the long run?
David Spetzler: That was really more about 1 specific mutation, not liquid in general. There's still incredible clinical utility of liquid profiling. So the fact that the ESR1 targeted agent wasn't approved doesn't really impact the broader utility of profiling.
Operator: Our final question comes from the line of Kyle Mikson of Canaccord Genuity.
Alexander Vukasin: This is Alex Vukasin on for Kyle Mikson. So congratulations again on the ChromoSeq approval and launch. Just to kind of tap into that again, what is the rate that you have for this test? And from like a dollar perspective, what is the addressable market we're looking at?
Luke Power: Yes. So the rate is $3,228, what we got from MolDX. So from a market standpoint, Bobby?
Robert Hill: Yes. From a market standpoint, there are about 50,000 patients that made 3 indications that are set forth in the MolDX -- indications for the 3 different ones. There are existing medical policies for commercial lines of business that we believe that when we submit to payers that we will gain coverage on, because of the depth and performance of our assay. And so we're already deploying the team to go talk to the payers and add where we are already contracted with MI Cancer Seek, that would give us the opportunity to add the coverage there as well.
Alexander Vukasin: Got it. Just one more for me. You spoke to the expansion of your Precision Oncology Alliance in this call for which you plan to host summit on the eve of the ASCO conference. On ASCO, can you elaborate what types of data you'll be presenting for pipeline and recently launched products, including MCED and MRD among others?
David Spetzler: I mean we have a lot of data that we'll be presenting. It's embargoed until the conference so we can't really talk about it now. But there's going to be a lot.
Operator: Thank you. This does conclude the Q&A session and the program. I'd like to thank you for your participation. You may now disconnect.
J. Denton: Thank you. Earlier today, Caris Life Sciences released financial results for the quarter ended March 31, 2026. Joining from Caris today are David Dean Halbert, our Founder, Chairman and CEO; David Spetzler, our President; Brian Brille, our Vice Chairman and EVP; Bobby Hill, our Chief Commercial Officer; and Luke Power, our CFO. 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. These risks are discussed in our SEC filings, including our annual report on Form 10-K filed with the SEC. Except as required by law, Caris disclaims any intention or obligation to update or revise financial projections and forward-looking statements whether because of new information, future events or otherwise. The information discussed in this conference call is accurate only as of the live broadcast. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the press release Caris issued today. A copy of today's presentation materials can be found on our Investor Relations website. I will now turn the call over to Brian.
Brian Brille: Thanks, Russ, and thank you all for joining our first quarter 2026 earnings call. This is a strong start to the year, and we're pleased to report continued growth, profitability and cash generation, which will continue to support our investment strategy focused on MCED launch, the broader product pipeline and commercial platform expansion. As illustrated on Slide 3, our platform continues to expand across technology, scale and commercial breadth. We are now supporting more than 6,100 ordering oncologists with approximately 70% of orders coming through our EHR and portal channels. In the first quarter, we completed 52,800 cases, up 15% year-over-year. We're very excited about the initiatives that our CCO, Bobby Hill, is driving, and we began to see the benefits of these in February and March. With this clinical activity, our data set has surpassed 1.07 million profiled cases, including more than 677,000 whole exomes, 728,000 whole transcriptomes and roughly 790,000 match profiles. We also reached another important milestone with the recent addition of the 100th Precision Oncology Alliance member, UC San Francisco. We've launched 2 exciting products, Caris ChromoSeq and Caris MI Clarity. ChromoSeq is a therapy selection assay for hematological cancers, which expands the breadth of our offerings and features a cutting-edge whole genome technology. ChromoSeq was launched on April 1. In addition, we launched Caris MI Clarity, an exciting prognostic test designed to deliver insight into both early and late distant recurrence risk for breast cancer by digital pathology. Finally, and importantly, we're making progress with Caris Detect multi-cancer early detection, and we're getting ready for commercial launch with Everlywell with plans to add additional channel partners. Our philosophy is a long-term strategic orientation to develop the best offerings on the market and to pursue this innovation while generating profitable growth and maintaining financial strength. We had a strong first quarter with total revenues increasing 79% year-over-year to $216 million. As demonstrated on Slide 4, this result was driven primarily by strong performance from clinical profiling. Molecular profiling services revenues increased to $211 million in the first quarter, representing an increase of 85% year-over-year. In summary, across the board, we had a very productive first quarter, illustrated by the quarter highlights on Slide 5. This strong revenue performance, combined with the operating leverage inherent in our business model has produced continued positive financial results while we ramp up investments, including revenue growth of 79%, which was driven by volume growth of 15% and a 61% increase in clinical ASP. This revenue growth has led to improved gross margins of 65% on a GAAP basis, up from 47% in the first quarter last year. We've invested significantly this quarter while maintaining financial discipline. This approach has produced positive adjusted EBITDA of $26 million as well as positive free cash flow of $22.5 million. This is our fourth straight quarter of positive adjusted EBITDA and positive free cash flow and provides us with valuable strategic flexibility for ongoing investment in our tech platform for new products as well as the ability to develop new channels such as MCED. In addition, our balance sheet continues to strengthen with cash on hand growing to slightly above $825 million, an increase of $23.4 million in the quarter. Finally, as a result of this profitability profile, we were able to attractively refinance our credit facility. The new $400 million debt facility led by Blue Owl and Blackstone offers many advantages, lower costs, saving approximately $6 million in annual interest, an extension of maturity date 3 years from January 2028 to April 2031 and a committed delayed draw term loan of $300 million on the same terms for any potential strategic acquisition. We believe that our financial performance gives us unique strategic flexibility, which supported our investment program in the first quarter. We're continuing to invest in our product pipeline, importantly, in our MCED business, which Dr. Spetzler will describe in detail as well as the expansion plan for our sales organization. We believe that our commercial channel is highly differentiated and has many strategic edges. Bobby Hill is bringing enhanced discipline and alignment to the overall platform. We're committing new resources to expand the commercial footprint with important hires across the platform, expanding the number of territories covered and building product-focused sales teams. As stated previously, our strategy is to maintain financial discipline through a strong balance sheet and profitability. These financial pillars of strength will allow us to realize our mission of making precision medicine a reality to benefit patients and support physicians. I'll now turn the presentation over to Bobby to provide an update on our commercial business and related strategic initiatives. Bobby?
Robert Hill: Thanks, Brian. I will provide a brief update on our molecular profiling business, along with our progress on the initiatives for the commercial teams in 2026. On Slide 6, this shows our strong molecular profiling revenues performance for this quarter. with revenues increasing 85% to $211 million. This revenue growth was driven by a 15% year-over-year growth in clinical case volumes to approximately 52,800 profiles and a 61% increase in ASP for our comprehensive profiling tests, reflecting our market access and billing teams' continued excellent execution. We continue to see the benefits of ASP driven by our successful launch of MI Cancer Seek last year, and these benefits are reflected on the slide. Our tissue ASP increased by 70% to over $4,300 and our blood ASP increased by 14% to just under $2,500, driven by billing, our PLA code and improved payment for Caris Assure. Luke will discuss the breakdown of this further during the financial update. Moving on to Slide 7, I'll spend a minute on the commercial changes we made at the beginning of the quarter and why we feel good about the trajectory coming out of the quarter. We completed the realignment of the sales teams in January 2026. That included expanding our territory structure from 82 to 146 territories and continuing to build out the field organization. We made those changes deliberately to improve coverage, sharpen accountability and create a stronger footprint for execution across both MI Cancer Seek and Caris Assure, along with setting us up well for product launches. January was a transition month. As expected, given the scale of the realignment and expansion and following the realignment, activations in February and March grew approximately 20% year-over-year compared with the same 2 months period last year. And full quarter activations increased 17% year-over-year. That reinforces our confidence in the underlying demand trajectory and based on the completion cadence in February and March, supports a quarterly exit run rate of roughly 56,000 completed cases. For Q1 overall, we completed approximately 52,800 therapy selection cases, up 15% year-over-year, including approximately 43,600 tissue cases and approximately 9,200 Caris Assure cases. The key point is that demand accelerated as the quarter progressed due to the great work of the sales team, while completed case recognition reflected normal timing between activation and completion. Beyond overall volume, the broader commercial engine continued to perform well. Caris Assure volume grew 58% year-over-year. More than 70% of orders were submitted electronically. Over 3,000 physicians are using EMR integrations, and we ended the quarter with more than 270 commercial team members as we continue building toward our approximately 300-person goal. So overall, we feel very good about how the team has performed with the initiatives. And I'll now turn it over to Dr Spetzler to continue our progress on our product pipeline, in particular, around Caris Detect. Spetz?
David Spetzler: Thanks, Bobby. I wanted to start with an important milestone for the quarter for Caris, which is the final readout for Achieve 1 for Caris Detect described on Slide 8. At the high level, these data points serve as our CLIA validation of the clinical accuracy study and reinforce our conviction that our whole genome solutions -- our whole genome sequencing approach to early detection is fundamentally differentiated. In the Achieve 1 data, Caris Detect delivered a 60.3% Stage I and Stage II Sensitivity with a 99.2% asymptomatic specificity across 3,014 subject high-risk cohort. This is a meaningful result in early detection, particularly when you consider both the size of these evaluable cohorts and the complexity of the underlying biology we are trying to detect. What gives us confidence in these results is not just the top line numbers, but the platform underneath them. Caris Detect is built on the foundation of Caris molecular profiling data, which now includes more than 1 million processed cases and over 50 billion molecular markers. That breadth and depth of data matters. It is what allows our AI models to identify difficult to detect biological signals associated with early-stage cancer with the level of resolution that we believe is differentiated in the field. When you look at performance by stage, the pattern is exactly what you would see in a high-performing assay. Sensitivity increases consistently with stage: 56.8% in Stage I, 67.7% in Stage II, 79% in Stage III and 98.6% in Stage IV. We also reported 96% benign tumor and high-risk patient specificity alongside the 99.2% asymptomatic specificity results. We split the population of patients without cancer into 2 different groups, because a false positive in a patient with a benign tumor or precancerous lesion should have a very different implication than a false positive in a healthy person. Taken together, those data show a strong balance between sensitivity and specificity across clinically relevant populations. Importantly, the cancer type readouts were also encouraging. In the total Stage I and II data sets, we saw a sensitivity of 53.7% in breast, 74.1% in prostate, 73.4% in lung, 60.6% in uterus, 61.8% in bowel, 81.3% in head & neck, and 70% in pancreatic cancer. And maybe the most important strategic point on this slide is that these results were generated using only 1 of 9 potential pillars. In other words, we believe there is still room to improve from here as additional pillars may further strengthen overall performance over time. So when we look at Achieve 1, we do not just see a successful data readout; we see proof that the biological foundation is working and a platform that still has meaningful upside ahead of it. We have been doing a beta launch in the last few weeks and still anticipate commercial launch later in Q1 with Everlywell. Moving to Slide 9, this also reflects the status of our robust pipeline. And I'll touch on these before letting Luke wrap up with the financials. First, as Brian mentioned, Caris ChromoSeq is now launched for the MolDX coverage. This is the whole-genome heme therapy selection solution designed for AML, MDS, MPN and suspected myeloid malignancies. The assay is differentiated by greater than 200x depth of coverage across the whole genome, the ability to detect the full range of clinically relevant genomic alterations and approximately 1.6 billion reads per patient. Second, we have also launched the Digital AI only version of Caris MI Clarity. Caris MI Clarity is designed for both menopausal patients with (sic) ER-positive, HER2-negative node-negative early-stage breast cancer at the time of diagnosis. We see this as an important extension of our platform into recurrence risk assessment designed to support better decision-making and reduce unnecessary therapy. Third, in MRD tumor-naive, we continue to focus on colorectal cancer. This solution uses the Caris Assure platform as tumor-naive by its design as an intended to support minimal residual disease detection from the whole blood sample. We are currently compiling additional data for the MolDX technical assessment. And fourth, in MRD tumor-informed, development and launch planning have made progress. This is a pan-tumor opportunity intended for Stage I, II and III disease. It uses tumor-normal whole genome sequencing to identify trackers with a proprietary approach designed to minimize false negatives and maximize tracker count to achieve ultra-low sensitivity. And finally, before wrapping up, I also want to provide an update on Caris Assure. We recently completed our submission to New York State, and we will provide an update to everyone once we hear back on that submission. We had a very productive few months so far in 2026 with the newly launched solutions and are continuing to generate additional data and multiple avenues to extend the same molecular and AI foundation across therapy selection, risk recurrence, early detection and MRD. With that, I will turn it over to Luke for the financial updates.
Luke Power: Thanks, David. Turning to Slide 10. We delivered another strong quarter financially with total revenue of $216 million, up 79% year-over-year. The main driver remains molecular profiling, which grew 85% versus Q1 of last year, and that was on continued ASP improvement and volume growth. Therapy collection completed volume was up 15% in the quarter. And as Bobby discussed, we were very pleased with how we exited the quarter. While completed cases came in modestly below our initial expectations due to timing, as discussed, activations improved sequentially for the quarter for both tissue and blood following the January realignment. And that stronger case intake we saw exiting the quarter gives us great confidence in the Q2 and the balance of the year. Turning to Pharma and Research revenue, this was $5.4 million versus Q1 2025 revenue of $6.8 million, and was due to the deliverable movement of our discovery and data businesses under contract, which will flow through over the balance of the year and is supported by improved contract activity. Overall, our revenue continued to translate into a strong bottom line with positive adjusted EBITDA and positive free cash flow for the fourth consecutive quarter, reflecting the disciplined approach we continue to take as we invest in the business. As I stated on the last earnings call, we intend to utilize this financial strength to fund the pipeline and the commercial investments throughout 2026. And you can start to see that in the numbers. Operating expenses were $136 million in Q1, up from $132 million in Q4. Purchases of property and equipment were just over $10 million, up from $5.1 million in Q4. That is as we continue to prepare for pipeline launches, including early detection, while still delivering positive adjusted EBITDA of $26 million in the quarter and positive free cash flow of $23 million in the quarter, which also include our annual bonus payments of $30.5 million. Turning to Slide 11. Q1 continued to validate the strength of our molecular profiling business with molecular profiling revenue being $211 million in the quarter, up 85% versus Q1 of last year. Reported revenue and ASP continued to benefit from favorable collections across both MI Profile and Caris Assure. And as this chart on the right shows, we have seen a meaningful buildup in the underlying revenue base over the last several quarters, with additional upside where collections have exceeded prior accrual assumptions as we continue to have collection success from the excellent work by our billing and market access teams. At the assay level, MI profile-based ASP was $4,091 in Q1 and Caris Assure base ASP was (sic) $2,421 showing the benefit from payer contract in progress and stronger collection experience. With regards to our ASP, I also want to spend a minute on reimbursement framework because there has been a little confusion on this point recently. For us, both assays are CDLTs and not ADLTs. That means these are reported under PAMA, and the 2026 PAMA reporting window runs from May 1 through July 31, based on data from January 1 through June 30, 2025, with any related fee schedule update becoming effective January 1, 2027. As an update, we submitted our PAMA data on May 1 and do not expect any downward adjustments from that. We also continue to support the broader CRUSH efforts and do not view that as changing our underlying reimbursement position. Turning to Slide 12, this highlights the key commercial and reimbursement tailwinds supporting the business in Q1, and that is demonstrated by our approach of always focusing on the technology first. Starting with MI Profile, we continue to benefit from MI Cancer Seek and the steady improvement we have seen through 2025 into Q1 of 2026. That progress has been supported by our contracting and payer collection experience as demonstrated on the previous slide. At this point, we're above $225 million covered lives for MI Cancer Seek, which we expect to continue to increase throughout the course of this year, and the assay represented more than 75% of our tissue volume in Q1. As touched on before, we also delivered about 9% completed volume growth in MI Profile in the quarter compared to Q1 of 2025, including a record February and March period following the sales realignment that also drove stronger sequential activations versus Q4, and it's due to the great work done by our sales team following the realignment. And that momentum will flow into Q2. On the Caris Assure side, this came in line with our expectations with Assure's volume growing 58% year-over-year. And importantly, volume also increased 7% sequentially. So we continue to see traction in blood as we grow our penetration there with a differentiated solution. This continued leverage resulted in molecular profiling services gross margin being 65% in Q1, compared with 47% in Q1 of last year, which is an improvement of over 1,800 basis points year-over-year. And finally, moving to guidance on Slide 13. You can see we're reaffirming our guide from February, and I'll address 2 key components on this prior to opening up the call the questions. Starting with volume. Based on the February and March end, we remain confident that the full year volume framework. We continue to expect tissue growth in the low teens and blood growth in the high 50s to low 60s. The stronger activation trend exiting Q1 supports our guide view and that timing gap between activations and completed cases should normalize as we move into Q2 and throughout the year with the realignment completed. With respect to the pipeline, we have launched Caris ChromoSeq, which was approved by MolDX priced at $3,228 and also MI Clarity. After Q2, we will evaluate and incorporate the contribution from those launches along with any incremental impact from our continued sales strategies and commercial expansions. On revenue, while Q1 performance points us towards the higher end of the range with a beat on our expectations for the quarter, we are reconfirming guidance today, and we'll evaluate after Q2 with the additional history of the new launches and the continued execution. I will stop there and turn it back over to the operator for questions. Operator?
Operator: [Operator Instructions] Our first question comes from the line of Michael Ryskin of Bank of America.
Alexa Chan: This is Alexa Chan on for Mike. I just have a couple of ones here. Maybe to start, can you talk about the impact that the sales realignment might have had on tissue volumes this quarter? And then as a follow-up, can you discuss your confidence in achieving the 20% volume growth target for the year given the softer start? And we appreciate that the sales force was realigned and that trend improved in February and March, but it still appears to require a significant ramp from here.
Robert Hill: Yes, as we -- any time when you realign a sales organization and put them into new territories, we saw a little bit slower start to the very beginning of the year. The beginning of the year sometimes is lower, so that's why we chose to do it then. But what we saw with tissue volume each month after that. And what we -- and what we're trending at, we feel confident that we're going to achieve 20% year-over-year by the end of Q4.
J. Denton: Yes. And one of the reasons why we also disclosed kind of the exit rate on the completions for February and March is what also gives us confidence. You can see based on those numbers, like we've improved dramatically on the tissue front from where we were running on a monthly rate last year with over 15,500 for kind of on average for February and March. So we believe that continued trend is going to benefit us as we go into Q2. So we feel good about the low teens guidance.
Operator: Our next question comes from the line of William Ruby of TD Cowen.
William Ruby: First question is just on the clinical volumes in the first quarter. Did weather hold back to clinical volumes at all? And if so, by how much?
J. Denton: No. So like the reason why we pointed out, we've gotten the cases in the door, so what we expect to happen and the reason why we're reaffirming that guide from a volume standpoint is what you'll see now is an improvement in the sequential growth from Q1 to Q2 that we were initially expecting kind of a 7% growth sequentially from Q1 to Q2. Now that's going to be 10%. So those cases will flow through in the second quarter, and it will be caught up by the end of the second quarter as we progress into the second half of the year.
William Ruby: Got it. And then if you could just discuss kind of the traction in blood testing. What's been the strategy impact? And where are you having the most success in types of accounts? And just up on that, please?
Robert Hill: Yes. We've expanded in -- before Q1, our liquid product specialist team. A bunch of individuals that are highly skilled at helping the appropriate patients get blood testing. We saw 135% growth in their targets quarter-over-quarter. And because of that quarter-over-quarter growth, we've also said that we're going to double the size of that team again in Q2. Tissue profiling was our base business, and now we're getting good at selling blood profiling. And so for the right patients, we'll continue to do that, take those learnings to the rest of the sales force.
David Spetzler: Probably also worth saying, the version of Assure that we submitted to New York State significantly increases the amount of RNA profiling that we're doing, going up to about 600 million reads from 5 million reads.
Operator: Our next question comes from the line of Vijay Kumar of Evercore.
Vijay Kumar: Maybe first one on a big picture question, if you will. I think, Luke, you brought up the CRUSH initiative. Space has been under pressure. Investors are nervous about reimbursement in the space. Just talk as high level, is there a rest of the space on the reimbursement front? And if so, how is Caris differentiate it from other peers in the space when it comes to reimbursement?
Luke Power: Yes. It's the reason why we wanted to call it out in our scripts is there's been some confusion. What we've managed to do is it's a little unique in that we managed to go through and we went through the CDLT process. So our codes are like CDLT, not ADLT. So we actually feel very good and we actually submitted our PAMA submission last week based on the time frame. So we feel good about it. I don't feel like there's already mechanisms in place outside of CRUSH for pricing review. And PAMA is obviously the key one for us. And based on our submission, we feel really good about our pricing. As I said, we don't expect any downward adjustments from that. So we feel good about the initiatives. We're supportive of CRUSH, obviously. We've been at this a very long time, and we kind of firmly believe and are -- that we are pretty set from a pricing standpoint.
Vijay Kumar: Just to be clear, on that point, are you trying to make a distinction between CDLT and ADLT and maybe CDLT is having more visibility on the pricing element if there's any rest of the space?
Robert Hill: Yes. I think the -- how we price both MI Cancer Seek's PLA code and Caris Assure's PLA codes not go through the ADLT pathway. And so those were priced, MI Cancer Seek through Crosswalk, and Caris Assure through Gapfill. And then we are subject because we did not do ADLT to the 3-year PAMA cycle that's going through it. And as Luke said, we put our data and PAMA on May 1, and we feel very good about price stability.
Vijay Kumar: That's helpful. Then maybe, Luke, one on the guidance comment you made here on Q-on-Q 10%. Was it a volume comment or a revenue comment? And if you could just clarify what was true-ups in Q1? What was underlying gross margins ex true-ups? And how should we think about gross margin progression?
Luke Power: Yes. Gross margin came in exactly in line with what our expectations was, in the kind of mid-60s. Again, our focus right now this year is more on the investment side. I think as we progress into later on this year and into next year, we'll start focusing more on improving the margin standpoint. So generally, it came right in line with our expectations were from the gross margin standpoint. From a true-up standpoint, again, that was very minimal compared to what we've seen last year. We continue to execute and continue to appeal on the reimbursement front and continue to have success. So it was a very small percentage compared to what you saw in Q4. But as we progress throughout 2026, as I stated previously, those will start getting smaller and smaller as we continue to have the uptick in the overlying ASP.
Vijay Kumar: Understood. And sorry, and the 10%, was it volume or revenues?
Luke Power: So that's from a volume standpoint. So the way we were thinking about it is that 2.5% that will flow from Q1 will flow into Q2 from a completed standpoint. The cases came in the door in Q1, but it will be completed in Q2. So what our expectation is now for Q2 is, over 58,000 cases, which would be a 10% sequential growth from Q1.
Operator: Our next question comes from the line of Subbu Nambi of Guggenheim.
Ricki Levitus: This is Ricki on for Subbu. Maybe one for Bobby. You ended the quarter with, I think it said over 270 sales reps, and earlier in the year you said you would increase head count by 20% to 25%. So it sounds like you still have more reps left to hire. Could you give us some color on how that hiring is progressing and also on how the 20 or so new reps that you've brought on year-to-date have been ramping up?
Robert Hill: Yes, we're progressing right on track of where we want to be. We changed territory size -- or territories and made them smaller. So we went from 82 to 146 territories. We'll continue to grow that amount. We have the first wave hired. We're sending them through training. They're already out making calls. And we've significantly revamped our training program. We're excited with that development, and so yes, we're on track to hit that 300 number and hire them all in Q2, approximately 300 number, and we feel very good about the ramp-up and what we've changed.
Operator: Our next question comes from the line of Casey Woodring of JPMorgan.
Unknown Analyst: This is Martha [indiscernible] on for Casey. Apologies if I missed this, but how should we think about 2Q volumes for tissue and blood, any color you can share there? And then also on the pharma R&D revenues? And then another one would be on the initial MCED test uptake, are you seeing any contribution this year?
J. Denton: Yes. I can definitely take that. So as we just kind of just stated, our expectation is for a 10% sequential improvement from Q1 to Q2 in volume. That would get you above 58,000 cases, which, again, we feel very good about based on what we saw exiting the quarter. And then from a blood and tissue standpoint, you will see those tissue cases flow into Q2. So we would expect to be in the 47,500 cases for tissue and then approaching over the -- we feel very confident about those for Q2. And then from a revenue standpoint for Q2, our expectations right now based on the initial guide that we put out in February was for that kind of 32% growth in overall total revenue. And then the last question, contribution from Caris Detect. Again, we'll assess that. Our plan is to still launch that in Q2, that we're progressing along very nicely. And then I'll assess that as we get into the Q2 earnings on what the contribution is going to be for the second half of the year.
Operator: Our next question comes from the line of Patrick Donnelly of Citi.
Unknown Analyst: This is [indiscernible] on for Patrick here. Just curious on the profitability side for both 2Q and for the year. I think you previously had noted a certain range -- a certain cap for the EBITDA profitability, and it's been since updated to positive. But just curious what you can share with us on both the EBITDA assumption for 2Q? And then for the full year, I know you have some investments in there, and maybe perhaps share with us what those are as well.
Luke Power: Yes. So from an EBITDA standpoint -- from a free cash flow standpoint, I'll repeat what I kind of stated on the last earnings call. We're going to utilize the kind of financial profile we have. So we're going to get that pretty close to neutral from a free cash flow standpoint in Q2. One of the key things that we're going to push on is with the early detection launch, there's going to be an increase in Q2 from a CapEx standpoint. We're expecting about $30 million of CapEx, of property and equipment purchases. Again, that includes the NovaSeq Xs that we're ramping up. We've also started to ramp up from an inventory purchase standpoint ahead of the detection launch. So you're going to have additional spend from that standpoint. So our goal going into Q2 is to utilize, obviously, the free cash flow that we're generating to fund the preparation for Detect launch, along with pushing, obviously, MI Clarity on Caris ChromoSeq as well. Then from an EBITDA standpoint, we're not guiding to that metric because, again, the key focus for us is pushing the pipeline through, pushing through the commercial activities that Bobby is putting in place and along with getting the Detect product launch. So from an estimate stand line for Q2, we have the 32% growth for revenue and then expect a mid gross margin of 65%, is where we expect gross margin. And we'll also ramp up our OpEx as well from where we were at $136 million to over $140 million. So again, that will get you a small EBITDA, but it's not our primary focus for Q2.
Unknown Analyst: Got it. That's super helpful. And just one more on -- well, first, congrats on the pipeline coming out here. It's great to see launches and reimbursement coming through. And just curious on the MRD front, I think you mentioned on the update -- on the prepared remarks, that it's still in prepared for being launched. I'm just curious what that priority is, MRD exactly, what is that priority in the pipeline for you guys? Is that something that you guys have put emphasis on and aiming to launch perhaps late this year or sometime next year? Or what can you share with us on the MRD and time line front, please?
David Spetzler: Now that we have these other product launches done and behind us, MRD is the next priority. So we'll be focusing on that quite heavily.
Operator: Our next question comes from the line of Mark Massaro of BTIG.
Mark Massaro: I wanted to start on a pipeline question. Now that you have MolDX approval for ChromoSeq and it's launched, can you speak to the unmet need? I think oftentimes, there's a whole lot of conversation about solid tumor profiling. But can you just sort of speak to the unmet need in myeloid?
David Spetzler: Sure. So what happens today is that those patients get a whole lot of small channel tests, a combination of different technologies. And so it's not comprehensive and they often miss things. Those tests are also not designed to pick up resistance components. And so with our approach, we're able to, in one fell swoop, not only identify all of the components that allow optimal therapy selection, but also identifying when that therapy is no longer effective. So it's a truly comprehensive approach to hematological malignancies, and that's a hotspot that is being done today.
Robert Hill: And with the turnaround time that the team was able to achieve and what we're seeing from the launch, that gets patients a complete answer faster than they would get we're testing with multiple different tests trying to chase down a diagnosis.
Mark Massaro: Okay. That's helpful. I know that breast cancer is one of the important indications in your early detection initiatives. Can you just speak to that disease state relative to others? How should we think about the landscape progressing over time as you guys think about screening for various cancer types?
David Spetzler: Yes. So I mean breast cancer is one of the more common types of cancer. It's already highly screened for. And mammography has its limitations, and so it's important to us to make sure that we're servicing that patient population really, really well. The performance that we have shown in Achieve 1 is already superior to mammography. And so it's inevitable that older technologies are going to be replaced by future superior technologies, and that's what's happening right now.
Operator: Our next question comes from the line of Evie Koslosky of Goldman Sachs.
Elizabeth Koslosky: So I wanted to ask on the quarterly run rate you gave for February and March of 56,000 tests relative to the 52,800 you reported for the quarter. I think you said that's up 20% year-over-year relative to February and March last year. I guess, could you talk through the split between tissue and blood? And then how durable you think the acceleration in volumes is post the sales force realignment? And was there a level of pent-up demand in the latter half of the quarter?
Robert Hill: Yes. The split follows our normal split growth when we went from January into February and March. So we saw ramp-ups in both products. And we're excited about what that was able to do and the quickness of that turnaround. As we look at that volume, as Luke has discussed, going into Q2, we still feel very confident that we'll be able to achieve the numbers that we've set forth for guidance, and we expect both products to continue their growth.
Elizabeth Koslosky: Great. And then any update on the M&A and kind of capital allocation strategy? I mean I know there's a focus kind of to reinvest more organically, but any specific areas or gaps in your portfolio that you would look to fill inorganically?
Brian Brille: Evie, it's Brian. I don't -- there's no gaps. And we've been a pioneer through organic growth and building our technology platform. So there's nothing in particular that we think we need. On the other hand, we're very strong with respect to our financial profile, our new debt facility gives us additional flexibility. So we're definitely in a position of being flexible and tactical if we see the need.
Operator: Our next question comes from the line of Tycho Peterson of Jefferies.
Noah Kava: This is Noah on for Tycho. I wanted to start by asking about the pharma R&D business. I think it came in a few million dollars light of consensus expectations on revenue. How are you thinking about the commercial investment in that business? Can you speak to orders or backlog performance that justifies maintaining the guide here?
Luke Power: Yes. So as we kind of stated on the last earnings call, you always have Q1 and Q3 are always kind of the lower quarters from a pharma standpoint. It's just a natural cadence that we progressed through throughout the year. So the revenue, the reason why we're maintaining the guidance is that revenue delta from the Q1 expectation, it's based on contracts we already have under contract. So the Genentech deal that we publicly disclosed, there's revenue dollars that moved from Q1 that will flow into Q2. And the same with some of our data partners that we have under contract that will deliver that data in the next quarter or 2. So we feel good about that. And we do expect from a Q2 standpoint to obviously see that increase that we've seen over the last couple of years where Q1 is always lower and Q2 ramps up, Q3 comes down and Q4 ramps up. So we feel confident right now based on that -- the existing guidance playing out.
Noah Kava: Okay. That's helpful. And I wanted to ask one more. I know a competitor had a recent study that went to ODAC for liquid biopsy informed drug trial that ODAC voted against. How are you thinking about implications for serialized liquid biopsy testing? And do you have any embedded assumptions for liquid testing, test per patient expanding in the long run?
David Spetzler: That was really more about 1 specific mutation, not liquid in general. There's still incredible clinical utility of liquid profiling. So the fact that the ESR1 targeted agent wasn't approved doesn't really impact the broader utility of profiling.
Operator: Our final question comes from the line of Kyle Mikson of Canaccord Genuity.
Alexander Vukasin: This is Alex Vukasin on for Kyle Mikson. So congratulations again on the ChromoSeq approval and launch. Just to kind of tap into that again, what is the rate that you have for this test? And from like a dollar perspective, what is the addressable market we're looking at?
Luke Power: Yes. So the rate is $3,228, what we got from MolDX. So from a market standpoint, Bobby?
Robert Hill: Yes. From a market standpoint, there are about 50,000 patients that made 3 indications that are set forth in the MolDX -- indications for the 3 different ones. There are existing medical policies for commercial lines of business that we believe that when we submit to payers that we will gain coverage on, because of the depth and performance of our assay. And so we're already deploying the team to go talk to the payers and add where we are already contracted with MI Cancer Seek, that would give us the opportunity to add the coverage there as well.
Alexander Vukasin: Got it. Just one more for me. You spoke to the expansion of your Precision Oncology Alliance in this call for which you plan to host summit on the eve of the ASCO conference. On ASCO, can you elaborate what types of data you'll be presenting for pipeline and recently launched products, including MCED and MRD among others?
David Spetzler: I mean we have a lot of data that we'll be presenting. It's embargoed until the conference so we can't really talk about it now. But there's going to be a lot.
Operator: Thank you. This does conclude the Q&A session and the program. I'd like to thank you for your participation. You may now disconnect.