Caris Life Sciences Q3 2026 Earnings Call Transcript

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Provided by Quartr
November 4, 2026

Key Takeaways

  • Positive Sentiment: Growth accelerated: Third-quarter revenue rose 27% year over year to $275.4 million, while clinical case volume increased 21% to approximately 61,500. Management attributed the momentum to sales-force expansion and said it expects volume to reach about 65,000 cases in Q4.
  • Positive Sentiment: Full-year revenue outlook increased to approximately $1.04 billion–$1.05 billion, from $1.03 billion–$1.04 billion. Caris also reported $15.3 million in quarterly GAAP net income and its sixth consecutive quarter of positive adjusted EBITDA.
  • Neutral Sentiment: Caris is extending its product portfolio across cancer detection, treatment monitoring, and post-treatment surveillance, with Caris Assure Therapy Response Monitoring launched and Caris Confirm planned for December. Reimbursement work is still underway for the new products, and the next interim readout from the 25,000-participant ACHIEVE-2 study is expected in Q1 2027.
  • Negative Sentiment: Investment and cash use remain key watch points: Operating expenses rose $48.1 million year over year, and quarterly free cash flow was negative $39.7 million, partly due to planned inventory and growth investments. Management expects positive free cash flow for Q4 and the full year, but raised its operating-expense outlook to approximately $620 million.
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Earnings Conference Call
Caris Life Sciences Q3 2026
00:00 / 00:00

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Operator

Good afternoon, everyone, and welcome to the Caris Life Sciences third quarter 2026 earnings call. My name is Lisa, and I will be your conference operator today. All participants are on a listen-only mode. After the prepared remarks, there will be a question-and-answer session. As a reminder, this call is being recorded. I would now like to hand it over to Russ Denton at Caris. Please go ahead.

Russ Denton
Russ Denton
General Counsel at Caris Life Sciences

Thank you. Earlier today, Caris Life Sciences released financial results for the quarter ended September 30, 2026. Joining from Caris today are David D. Halbert, our founder, chairman, and CEO, David Spetzler, our president, Brian Brille, our vice chairman and EVP, 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 are based on management's current expectations and involve risks and uncertainties that could cause actual results to materially differ from those anticipated. For a discussion of the factors that could affect our future results, please refer to our SEC filings. We undertake no obligation to update these statements except as required by law. This call will also include a discussion of non-GAAP financial measures, which are adjusted to exclude certain specified items.

Russ Denton
Russ Denton
General Counsel at Caris Life Sciences

The reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are provided in today's earnings release. A copy of today's presentation materials can be found on our investor relations website. I'll now turn the call over to our founder, chairman, and CEO, David D. Halbert. David?

David Halbert
David Halbert
Founder, Chairman, and CEO at Caris Life Sciences

Thanks, Russ, and thanks everyone for joining. This was another record quarter for us with volume up 21% to 61,500 cases, and our revenue grew 27% to $275 million. What I like most about these numbers is that they are the continued result of a plan. At the start of the year, we realigned and expanded the sales organization and invested in the lab ahead of the demand we expected. Since then, we have delivered two consecutive quarters of acceleration, and this quarter's year-over-year volume growth is the strongest we've posted in over a year, and we expect that trend to continue into the fourth quarter. We have also taken the same approach with the product pipeline, where we have launched four products so far this year, and by year-end, we'll launch our fifth, Caris Confirm, our Whole Genome MRD assay, and complete our comprehensive approach across the patient journey.

David Halbert
David Halbert
Founder, Chairman, and CEO at Caris Life Sciences

And comprehensive isn't just a slogan for us. You can see that as recently as September, where we launched a new version of Caris Assure for therapy selection that reads the therapy-relevant genes at 40,000X depth and takes our RNA reads past 600 million. We always say deeper, not cheaper, as the depth and breadth of an assay is what matters, allowing us to continue to drive the science forward. I made the decision to take the company to whole exome, Whole Transcriptome back in 2018, and that has produced our exome platform, which includes MI Cancer Seek, Caris Assure for therapy selection, and now Caris Assure for monitoring. We're taking the same approach for our next phase with expanding to Whole Genome, and you can see this in our approach for early-stage detection, therapy selection, and MRD.

David Halbert
David Halbert
Founder, Chairman, and CEO at Caris Life Sciences

Now, with regards to Caris Detect, I told you in August that the interest had run ahead of even my own expectations, and it has, but we're not going to chase it by overspending. We're building this deliberately. We've launched two national campaigns with Kevin Costner and Jordan Spieth, both of whom I've had the pleasure of sitting down with to discuss their reasons for participating in our ads, and we will continue to roll out and expand these into new markets in Q4 and beyond. Also, our next campaign will be focused on educating the public regarding performance and understanding of stage. The whole idea behind early detection is to catch the cancer while it is still treatable before it spreads, meaning early stage one and two.

David Halbert
David Halbert
Founder, Chairman, and CEO at Caris Life Sciences

After that, it's likely not to be treatable, and sadly, the tests being marketed currently use a technology called methylation, and a methylation-only approach doesn't work in early stages for most cancers, and it's unclear why someone would order one, like a poop test for one cancer when you could take a blood test for over 50 different cancers. That's exactly why we built Caris Detect on Whole Genome. It's designed to find cancer at those early treatable stages. We'll keep building it that way, and as David will discuss in a few minutes, we are also going to continue to demonstrate our best-in-class performance by expanding our ACHIEVE program. So I feel great about where we are. We went deeper when others went cheaper. We built a plan that is working, and we're funding every bit of it ourselves while we manage the P&L.

David Halbert
David Halbert
Founder, Chairman, and CEO at Caris Life Sciences

We'll keep making decisions the way we always have, by the mom rule. If it were my mom, I'd want her to get the most complete answer possible. Every patient deserves that, and that's how we'll make precision medicine a reality. Brian, over to you.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

Thanks, David, and thank you all for joining our third quarter 2026 earnings call. This is another record quarter and an extremely important quarter for Caris for many reasons. First, the commercial strategy and investment is working and is delivering accelerating volume growth. In addition, the MCED launch is advancing well with important new potential channel partners who are excited about Caris Detect's technology, and specifically early-stage sensitivity. We are also announcing our entry into the MRD and monitoring market with the launch this quarter of Caris Assure Therapy Response Monitoring. This will be followed by the upcoming launch in December of Caris Confirm for MRD. With the launch of these products, we now have the best molecular technology across the entire cancer care continuum. We did all of this while delivering sustained growth and profitability. Our commercial strategy and investment program is successful and delivering results.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

In the third quarter, we completed approximately 61,500 clinical cases, up 21% year-over-year. This is our second consecutive quarter of accelerating growth, up from 15% in the first quarter and 18% in the second quarter. We expect the momentum to continue as the commercial platform expands and new members of the sales force season. With respect to the pipeline, Caris Detect launched this summer, and Caris Assure Therapy Response Monitoring launched this quarter. As a result, as illustrated on slide four, our platform now spans the entire continuum of care, including therapy selection in tissue and liquid biopsy with MI Cancer Seek and Caris Assure, respectively, therapy selection in hematological cancers with ChromoSeq, Caris Detect for MCED, Caris Assure for monitoring, and Caris Confirm for MRD. We are very excited about the initial assay in our MRD product suite, Caris Assure for monitoring.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

Monitoring is highly important clinically to provide oncologists a quantitative measure of treatment efficacy. The elegance of our technology is that it utilizes the same product platform as Caris Assure Liquid Biopsy, with the same whole exome 23,000 gene platform, and the same liquid workflow our customers already use for therapy selection. The serial blood draws using Assure provide us with a consistent longitudinal view of cancer progression during treatment, and will add another valuable edge to our clinical genomic dataset. Caris Confirm, our tumor-informed Whole Genome approach to MRD, is on track to launch this December. Our clinical customers are excited about the launch of both of these products across the continuum of care. We get significant leverage from our commercial channel since each of these MRD products will be provided to the same institutions, the same oncologists, and the same patients that use us for therapy selection.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

Finally, our MCED platform, Caris Detect, has been the vision of our founder for many years, and the recent launch of Detect continues to build momentum. The unique multi-omic approach of Detect has produced exceptional early-stage sensitivity and is being well received by the market. The channel partner conversations from digital platforms to concierge medicine groups are going extremely well. We launched our first consumer campaign in the third quarter featuring Kevin Costner, and our second recently with Jordan Spieth, to raise the awareness of the importance of early-stage cancer detection and of Caris Detect. We are excited about our data and studies, and Spetz will outline that, including the expanded ACHIEVE program. Our philosophy continues to be a long-term strategic orientation, to develop the best, most comprehensive offerings on the market, and to pursue that innovation while maintaining financial strength.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

We had a strong third quarter with total revenues increasing 27% year-over-year to $275 million. As illustrated on slide seven, this is driven by molecular profiling services revenues of $262.7 million, also up 27%. I would point out that the prior year quarter also included a significant amount of true-ups, and as a result, on a pro forma basis, revenue grew approximately 45% year-over-year. In summary, we had a very productive quarter, illustrated by the quarter highlights on slide six. Strong revenue performance combined with the operating leverage in our model continued to produce positive financial results while we step up investment, including revenue growth of 27%, driven by clinical volume growth of 21%, and a blended ASP of $4,272, up five percent year-over-year. On a pre-true-up basis, our blended ASP was approximately $4,000, up 19%.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

We invested significantly this quarter while maintaining financial discipline. Adjusted EBITDA was $44.4 million, our sixth consecutive quarter of positive Adjusted EBITDA, and we returned to GAAP profitability with net income of $15.3 million. Year-to-date, Adjusted EBITDA is $126.3 million. Our balance sheet remains strong, with cash and investments of $769 million at quarter end. We believe our financial performance continues to give us unique strategic flexibility, which supports our ongoing investments in the product pipeline as well as the continued expansion of our sales organization. With that, let's turn to commercial performance. The commercial strategy and leadership we established in the first quarter is delivering systematically. As slide seven indicates, clinical case volume has grown every quarter this year, from approximately 52,800 cases in the first quarter, to 59,200 in the second, to approximately 61,500 in the third.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

Year-over-year growth has accelerated each quarter this year, from 15% to 18% to 21%, respectively, and we are pleased with acceleration in growth in both tissue and blood. The commercial strategy is working, and we expect to see ongoing growth acceleration for a variety of reasons. First, the therapy selection market remains rich with opportunity as cancer centers implement systematic precision medicine programs. The institutions and the individual medical oncologists greatly appreciate the breadth and depth of the Caris product technology, i.e. 23,000 genes. We expect that a recent launch of monitoring and upcoming launch of MRD will greatly enhance both our volume performance and also our appeal as a strategic partner with a technologically superior product line across the care continuum. Finally, we have exceptionally strong cancer center relationships, and the investment in FTEs will continue to help us activate more medical oncologists across our broadening product line.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

With respect to the commercial team investment, we ended the third quarter with 325 commercial team members, up from 290 at the end of the second quarter and 270 at the end of the first. We completed the realignment in January, expanding from 82 to 146 territories, and we have continued to add reps against that structure. Typically, new reps take six - nine months to begin to reach full productivity, so the hires we made through this year will continue to build towards their full contribution for some time. We believe that we have the best technology platform, and accordingly, we intend to continue this commercial investment plan to provide this broad product line to as many medical oncologists and institutions as possible. The digital footprint continues to expand as well.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

More than 75% of orders are placed through EMR and portal channels, with more than 3,500 physicians ordering directly through the EMR. We are making investments in research and studies, and our body of evidence now exceeds 1,300 publications and manuscripts. Our business model is very powerful. With every clinical case profiled, our dataset grows in size and power. As slide eight indicates, our dataset has surpassed 1.2 million profiled cases, including more than 796,000 whole exomes, 849,000 transcriptomes, with approximately 845,000 matched cases with clinical outcomes. We are currently evaluating AI partners with respect to both internal capabilities as well as external data partnerships. We are as excited about the prospects ahead of us as we have ever been. As illustrated on slide nine, our company's positioning is highly differentiated against huge market opportunities and demand.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

The Caris molecular technology features uniquely powerful breadth and depth, which is now being extended to new product modalities. We have an innovative go-to-market approach as both a clinical partner and a research partner. The Caris Precision Oncology Alliance, for example, is now up to 102 sites. We have important strategic flexibility given our profitability, which will enable us to continue to invest aggressively. We have exciting and significant catalysts ahead of us over the next few quarters, which offer growth and TAM expansion, ongoing commercial execution and investment, ASP expansion through Assure, a pioneering role in the MCED market, the recent launch of monitoring, and the upcoming launch of MRD. I will now turn the presentation over to Dr. Spetzler. Spetz?

David Spetzler
David Spetzler
President at Caris Life Sciences

Thanks, Brian. I will walk through the two new products and then the foundation model behind our digital AI platform, our planned expansion of our ACHIEVE program for Caris Detect, and we will close on interception. Everything I am about to talk through comes back to what David said at the open, deeper, not cheaper. Depth and breadth are what allows us to complete a comprehensive approach across the patient journey, from early stage detection to therapy selection, and now monitoring and MRD. Slide 11 frames the two launches of the fourth quarter together. Caris Assure Therapy Response Monitoring, which launched recently, covers the patient on therapy. Caris Confirm, launching in December, covers surveillance after treatment. Both are built on platforms we already run. Monitoring sits on our whole exome platform.

David Spetzler
David Spetzler
President at Caris Life Sciences

Caris Confirm sits on our Whole Genome platform, with the initial tissue sample to define the signature, then follow-up testing in blood. Each has its own evidence base, MONSTAR and our real-world cohort for monitoring, Ensemble and the real-world cohort for Caris Confirm. Reimbursement work is underway on both, a MolDx submission and preparation for monitoring, and a cancer type by cancer type strategy for Caris Confirm, and I will discuss each a little more. Let's start with Caris Assure Therapy Response Monitoring, which launched recently as part of the upgraded Caris Assure platform. For therapy selection, Caris Assure tells the oncologist which drug to choose. For monitoring, the same whole exome liquid workflow with matched buffy coat to remove clonal hematopoiesis gives a quantitative tumor fraction, and serial draws classify the patient as a molecular response, stability, or progression.

David Spetzler
David Spetzler
President at Caris Life Sciences

The readout arrives roughly four - eight weeks ahead of the scheduled scan. The validation is on the slide. Clinical validation included 124 serial pairs, and in the 90-patient landmark cohort, 96% of patients classified as molecular responders went on to show disease control on imaging, 49 out of 51. Patients classified as molecular progression had a hazard of subsequent radiographic progression nearly 9x higher than responders, 8.99, or 7.16 after statistical adjustment. In an early, independent real-world cohort of 1,037 patients, molecular progression carries a 2.35x hazard versus response, with the three categories separating in order. Analytically, the assay detects tumor fractions down to 0.1%, with precision under nine percent CV across lots and runs. Moving to slide 13. Caris Confirm is our entry into minimal residual disease and is currently planned for launch in December. The approach is tumor-informed and Whole Genome.

David Spetzler
David Spetzler
President at Caris Life Sciences

We sequence the tumor and a matched normal across the entire genome to find a patient's set of trackers, a tracker search space of roughly 2.5 billion bases. We then track those variants in serial blood draws on the same Whole Genome platform that powers Caris Detect. The pathway is relatively simple. A baseline blood draw with buffy coat plus tumor tissue from surgery, tumor normal subtraction to define the patient's tracker set, a landmark blood draw three to six weeks after surgery, and then surveillance draws every three - four months. That is what gives us an ultra-low limit of detection by design. The analytic performance speaks for itself, with a minimum positivity threshold of 1.38 parts per million. The intended use is pan-tumor, stage one through three solid tumors after curative intent treatment, a setting where patients are monitored for years.

David Spetzler
David Spetzler
President at Caris Life Sciences

Like therapy monitoring, this is a reoccurring test on infrastructure that is already in place. Moving to slide 14. This is our engine under our digital AI platform. HERO is our pathology foundation model. It was trained on 248,606 routine H&E slides across 52 cancer lineages, and 98% of those slides, more than 243,000, also have RNA sequencing alongside DNA sequencing and IHCs. That pairing is the asset. The molecular results give us every slide its labels. The process runs left to right on the slide. The H&E is scanned at 20x. The tissue is cut into tiles about a tenth of a millimeter across, roughly 2,300 per slide. HERO describes each tile as 3,072 separate numbers, the same for every target, with no retraining. For each target, the model learns how much each tile matters and weights the tiles into one summary of the slide.

David Spetzler
David Spetzler
President at Caris Life Sciences

From that, three models, one for each of DNA, RNA, and IHC, predict 297 alterations, 368 RNA expression levels, and 21 protein stains from the same slide alone. Our model powers Caris digital AI applications. That is why the pipeline on the right, morphological subtype, tumor grading, mutation prediction, treatment response, and survival prediction can move quickly. Each is a new head on the same foundation, trained on data we already have. Let me turn to Caris Detect. As we have discussed before, slide 16 shows why we built Caris Detect to combine many signals across cell-free DNA and RNA, expanding our shots across goals, expanding our shots on goal across each early tumor. Moving to slide 17, ACHIEVE 1, the basis for our commercial launch, showed 99.2% specificity and 60.3% sensitivity in stage one and stage two cancers, the stages where the cure rate is highest.

David Spetzler
David Spetzler
President at Caris Life Sciences

I will give an update on our planned next readout from ACHIEVE-2 in a few moments. As part of this quarterly update, I will provide an update on our ACHIEVE program. As you know, this is the clinical evidence program behind Caris Detect, and one that we are now seeing an expansion to, with four studies under the ACHIEVE name, totaling 63,000 patients. ACHIEVE-1 is the 3,000-patient study you just saw. That readout was delivered in the first quarter. ACHIEVE-2 is our large-scale validation with a target of 25,000 participants. We have enrolled approximately 20,000 patients, 80% of the way there, and we currently expect an interim readout in Q1 2027, as we have begun to run these samples. ACHIEVE-3 is a 10,000-patient prospective study in a high-risk population, with results returned to patients and a repeat Caris Detect at 12 months.

David Spetzler
David Spetzler
President at Caris Life Sciences

ACHIEVE-4 is a 25,000-patient prospective study in a general risk population, also with results returned. ACHIEVE-3 and 4 are in planning now. On slide 19, as DDH discussed, we have launched two campaigns for Caris Detect, and both point consumers to Caris Detect, and these will continue to be rolled out across markets into Q4 and beyond. Finally, personalized mutation interception. We outlined this program on our last call, so today I will keep it brief and focus on how the pieces of our platform fit together to support it. As a reminder, our personalized vaccine approach is built on capabilities we already run. Caris Detect finds the early signal, our sequencing defines the mutations that inform a personalized vaccine, and serial blood draws track whether it is clearing. Slide 21 shows the step where our platform is most differentiated, choosing the right mutation.

David Spetzler
David Spetzler
President at Caris Life Sciences

We select only the mutations that are expressed and visible to the immune system as vaccine targets, then track response over time. This is where our dataset does the work. Our ranking model achieves 83.8% positive predictive value and 86.5% for the top-ranked variant per patient, measured against a paired biopsy cohort of more than 42,000 patients. So we focus on the mutations most likely to prime a response. That is the focus of our science. Two new reoccurring use products on the platform, a foundation model that lets the digital AI portfolio grow quickly, detection that is both broad and precise, with an expanded 63,000-patient evidence program behind it, and an interception strategy that is novel. All resting on the depth-first approach. With that, I'll turn it over to Luke.

Luke Power
Luke Power
CFO at Caris Life Sciences

Thanks, David. I'll move relatively quickly through the numbers since we have touched on some of them already. We delivered another strong quarter with total revenue of $275.4 million, which is up 27% year over year, and brings our nine-month revenue to $755.2 million, which is up 45% year to date. Molecular profiling revenue was $262.7 million, up 27%, and pharma research and development services revenue was $12.7 million, up 37% year over year. As we have expanded our platform this year with new products and with MRD planned for launch later this quarter, we'll be moving to reporting total clinical volume only. This is consistent with how our sector reports and is the basis on which we'll report our preliminary full-year volume in January and provide guidance numbers going forward. That said, I'll provide a little bit more context around the current quarter volume numbers.

Luke Power
Luke Power
CFO at Caris Life Sciences

Clinical therapy selection volume in the third quarter was approximately 61,500 cases, up 21% year-over-year, and ahead of the 20% milestone we outlined for the quarter. This volume excludes Caris Detect, whose revenue we will report in our pharma research and developmental services line until it becomes material enough to break out along with its volume. Therapy selection remains the core of our current volume, and in the two quarters since the Q1 sales realignment, volume has grown approximately 20% year-over-year, and we are encouraged by that momentum heading into Q4. Therapy selection volume mix was in line with the trends from the past two quarters, with tissue remaining the core.

Luke Power
Luke Power
CFO at Caris Life Sciences

Both tissue and blood saw an acceleration in year-over-year growth rates from the second quarter, and our overall growth rate of 21% was the highest it has been in over a year, and is a testament to the great work being done by our sales and lab teams. For Caris Detect, we are pleased with the initial rollout, and we are continuing to expand our marketing, with two campaigns now running, and we will be expanding markets as we progress into Q4 and beyond. Moving to gross margin, this was 66% in the quarter, reflecting the mix impact of our expanding product portfolio, and we expect a similar level in Q4. That also reflects our focus on deeper, not cheaper, and you can see that by our recently upgraded Caris Assure assay, which is now running on the Illumina NovaSeq X platform with increased depth and reads.

Luke Power
Luke Power
CFO at Caris Life Sciences

Operating expenses were $163 million, up $48.1 million year-over-year, and about $10 million sequentially. That increase was in line with our expectations as we continue to invest in the commercial organization, along with increased marketing dollars for Caris Detect and the development work on therapy response monitoring and Caris Confirm. Overall, these results produced GAAP net income of $15.3 million compared with $24.3 million a year ago. Year-to-date, net income is $14.1 million against a net loss of $150 million the first nine months of 2025. Adjusted EBITDA was $44.4 million, our sixth consecutive positive quarter, compared with $51.2 million in the prior year, which again carried a larger true-up benefit. Year-to-date, Adjusted EBITDA is $126.3 million, up from $31.7 million for the same nine months last year. Free cash flow was negative at $39.7 million in the quarter and included $17.5 million in capital expenditures.

Luke Power
Luke Power
CFO at Caris Life Sciences

As we communicated in August, this was planned, as we used the free cash flow generated in the first half of the year to fund the ramp in inventory and the initiatives behind our pipeline, and you can see that in the working capital movements on the balance sheet. Through nine months, free cash flow is negative at $10.8 million, and with that inventory investment behind us, we expect to return to positive free cash flow in the fourth quarter and for the full year. We ended the quarter with $769.2 million in cash and investments, and we repurchased approximately $10 million of additional stock under our authorized share repurchase program in Q3. Moving to slide 24, we continue to demonstrate strong growth across volume and ASP within our molecular profiling business.

Luke Power
Luke Power
CFO at Caris Life Sciences

Blended ASP, base ASP surpassed $3,990, up 19% year-over-year, and including prior period collections, blended ASP was $4,272, up five percent. On the reimbursement front, we received the preliminary 2027 clinical lab fee schedule under PAMA cycle in September. MI Cancer Seek was maintained at $8,455. However, Caris Assure was increased to $5,250, up from $3,650, and this is effective January 1 of 2027, subject to the final schedule later this year. This will also have a positive impact on the commercial contracts we've been signing, as they are generally priced as a percentage of the clinical lab fee schedule rate. The higher rate should lift realized ASP across the contracted book as we move into 2027, and that is the covered life strategy we described last quarter.

Luke Power
Luke Power
CFO at Caris Life Sciences

We also received our first commercial plan payments for Caris ChromoSeq, and overall now, covered lives stand at approximately 264.4 million for MI Cancer Seek and 134.6 million for Caris Assure, both up again from the second quarter. Finally, turning to guidance. Given the strength of our first nine months, we're raising our full-year outlook range to approximately $1.04 billion-$1.05 billion, up from $1.03 billion-$1.04 billion, representing growth of approximately 28%-29%, driven by molecular profiling revenue. Excluding prior period true-ups, the guide implies fourth quarter growth in the 40% range, consistent with the underlying rate we delivered this quarter. On a reported basis, our fourth quarter guidance range of $285 million-$295 million is broadly in line with the fourth quarter of 2025, which included roughly $90 million of true-ups due to the acceleration we experienced last year from our MI Cancer Seek FDA approval.

Luke Power
Luke Power
CFO at Caris Life Sciences

Quarter-to-quarter, we also expect clinical therapy selection volume to continue on the growth trend demonstrated the last couple of quarters, and to be approximately 65,000 cases, and result in approximately 20% growth for the full year. We now expect GAAP operating expenses of approximately $620 million, up from approximately $600 million, or a growth of approximately 26%. That increase is deliberate. It funds the expanded commercial organization, the marketing behind Caris Detect, therapy response monitoring, and Caris Confirm, along with processing of the R&D samples for the ACHIEVE-2 interim readout. We continue to expect both positive Adjusted EBITDA and free cash flow to be positive for the full year.

Luke Power
Luke Power
CFO at Caris Life Sciences

Adjusted EBITDA is already $126.3 million through nine months, and we expect free cash flow to return to positive in the fourth quarter, bringing the full year to modestly positive, all while funding our growth initiatives that we just walked through. With that, I'll wrap up the presentation and turn it back to the operator and open it up for questions. Operator?

Operator

Thank you. If you would like to ask a question, please press star one on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, please press star one again. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. First question will be coming from Vijay Kumar of Evercore. Please go ahead.

Vijay Kumar
Vijay Kumar
Senior Managing Director at Evercore

Hi, guys. Thank you for taking my question, and congrats on a nice print here. Luke, maybe my first question for you on, I know you mentioned both tissue and blood volumes accelerated, but maybe if you could just give a little bit more color on the pace of acceleration, tissue versus blood, and a similar sort of commentary on ASPs, please. Where did the increase come from? I know ASPs were up 19%.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. So, Vijay, as we said in our remarks, we won't be breaking it out separately going forward, but what I can say and what I disclosed is the mix trend is consistent with what you saw from Q1 to Q2. So blood continues to grow, and tissue continues to grow. So the growth rates increased from what we reported last quarter, which is excellent and in line with our expectations, and I think we can continue to over-deliver on that as we progress into Q4. From an ASP standpoint, again, similar to last quarter, from a blended ASP, we continue to see strength in what our market access teams and our billing teams are doing. So we've had success across both Caris Assure and MI Cancer Seek continuing to get coverage there. So for us, our expectation is that's going to continue to improve into the fourth quarter.

Luke Power
Luke Power
CFO at Caris Life Sciences

And with the guidance that we put out, you're in a similar range of around that 4,000 base ASP, which would be a new record for us. So overall, feel great about the mix and everything is going according to plan.

Vijay Kumar
Vijay Kumar
Senior Managing Director at Evercore

That's helpful. Maybe a big-picture question. If I just look at how the year has progressed, your volumes have accelerated every quarter, and your fourth quarter guidance implies another step up to maybe perhaps 23 plus on clinical volume growth.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah.

Vijay Kumar
Vijay Kumar
Senior Managing Director at Evercore

So when you look at that progression and the fact that you have new tests launching, should 2027 clinical volumes accelerate from 2026 levels of 20%? Would that be a fair assumption?

Luke Power
Luke Power
CFO at Caris Life Sciences

It's a fair assumption. What we're not doing right now, though, is guiding to 2027 volume. The key for us coming into this year was kind of twofold. One was obviously doing the expansion in the commercial org, but the second was pushing out the pipeline as quickly as possible. Because we have unique tests and because they're the most comprehensive, we wanted to get through the end of the year with all those tests on the market, which is what we're striving for and will accomplish. So we feel very good about that. I think as we start looking towards 2027, the key for us was correcting the therapy selection growth, and we've seen acceleration both in tissue and blood this quarter, which is great. It shows the commercial plan is paying off.

Luke Power
Luke Power
CFO at Caris Life Sciences

As we progress into next year with the rollout of monitoring, with the rollout of Confirm, we'll do that in another disciplined, diligent way as we work through the reimbursement pathways. But it definitely should contribute on the top line because it's the existing sales force selling the products.

Vijay Kumar
Vijay Kumar
Senior Managing Director at Evercore

Thank you.

Operator

Thank you. One moment for the next question. Our next question is coming from the line of Subbu Nambi of Guggenheim. Please go ahead.

Subbu Nambi
Subbu Nambi
Managing Director at Guggenheim

Hey, guys. Thank you for taking my question. ChromoSeq and MI Clarity now have about two quarters of commercial history. Are they in the updated guide? How did each ramp in the quarter, and when do they become meaningful contributors?

Luke Power
Luke Power
CFO at Caris Life Sciences

Yes. They're obviously a smaller portion, and that's why I referenced the mix from the last couple of quarters. But they're continuing to grow, but they're obviously not at the same scale as what we're doing with our tissue and our blood assays. They'll continue to grow as we progress throughout the next couple of quarters. The 65,000 cases is for kind of key therapy selection, so it would include a small portion from them, but not a whole lot. As you can see from what we reported last quarter and what we're actually disclosing this quarter, I think you'll see that continue to improve, but it's not as big of a market right now as for tissue and blood.

Subbu Nambi
Subbu Nambi
Managing Director at Guggenheim

No, Luke, I was trying to get at when do they become meaningful contributors? I also have a follow-up.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah, I think as we progress into the end of the year and into next year, you will start to see heme continue to grow along with MI Clarity. I think right now, as we are looking at the guidance for the remainder of the year, they are not material compared to blood and tissue.

Subbu Nambi
Subbu Nambi
Managing Director at Guggenheim

Oh, got it. Think of it as more 2027 rather than this year. On the enhanced Caris Assure that has the trackable for response monitoring, you plan to pursue MolDX reimbursement for it. When do you plan to submit to MolDX, and do you have the data that you need, or you are still generating it?

Luke Power
Luke Power
CFO at Caris Life Sciences

Yes. Spetz, do you want to take that one?

David Spetzler
David Spetzler
President at Caris Life Sciences

Yeah. We have completed the trial, so we are working on that submission now. It should happen in the next several months. We need to publish it first, and it is always hard to predict how long the publication process takes.

Subbu Nambi
Subbu Nambi
Managing Director at Guggenheim

That is fair. A last one. What percentage of blood tests were attached to tissue tests in the quarter? You have always hovered around 30%-40%. Should we expect the same thing, or have you seen that attachment grow meaningfully?

Luke Power
Luke Power
CFO at Caris Life Sciences

We have seen it grow, probably not meaningfully. It has increased past 40%, so it has been at 42% for the third quarter, but not materially past that.

Subbu Nambi
Subbu Nambi
Managing Director at Guggenheim

Perfect. Thank you, guys.

Operator

Thank you. One moment for the next question, please. Our next question will be coming from the line of Lu Li of Bank of America.

Lu Li
Lu Li
VP at Bank of America

Great. Thank you for taking my questions. I guess I wanted to clarify, Caris Detect is now in the R&D line, the pharma R&D line. Is that true also in 3Q? Also related questions to that, so in terms of the 4Q guide, how do you kind of break out between the profiling business and the R&D? Any assumption will be great.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yes. Detect will be reported in there until we have a couple of more quarters. It is consistent with what we have kind of disclosed in the past with any new product launches. We will continue to monitor it, but when it becomes material. It was small compared to the relative $275 million we put up, so we have not broken it out yet, but we will continue to obviously, we feel really good about where it is going. I think as you look forward to Q4, it does not include any of the new products.

Luke Power
Luke Power
CFO at Caris Life Sciences

We will continue to do that from a guidance standpoint. We always like to wait a couple of quarters before we start looking at including additional new products in there. The breakdown for Q4 is effectively about $265 million for molecular profiling, and then the range of $20 million-$30 million for pharma, and that does not include any Detect.

Lu Li
Lu Li
VP at Bank of America

That is very helpful. On the MRD launch, I am wondering, can you just talk a little bit about kind of your reimbursement process? Definitely indication by indication, but do you have any timeline in terms of when are we going to see the first indication reimbursement? Thank you.

Luke Power
Luke Power
CFO at Caris Life Sciences

Do you want to take that, Spetz, or I can?

David Spetzler
David Spetzler
President at Caris Life Sciences

Yeah, it's kind of the same. We've completed our first trial, need to publish that one in colorectal cancer, and then we'll be able to submit to MolDX.

Lu Li
Lu Li
VP at Bank of America

So I guess will be kind of like 2027, will be kind of like good coming?

Luke Power
Luke Power
CFO at Caris Life Sciences

Yes.

Lu Li
Lu Li
VP at Bank of America

Okay. Thank you.

Operator

One moment for the next question. Our next question will be coming from the line of Adam Wieschhaus of UBS. Please go ahead.

Adam Wieschhaus
Adam Wieschhaus
Executive Director at UBS

Thank you for taking my question. You mentioned that Assure is going to move to the higher CLFS rate in January. I am just curious how you think about that magnitude and timing of the benefit to realize ASP in 2027, particularly as you have mentioned commercial contracts are generally priced as a percentage of that CLFS rate. Thank you.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah, Adam. Yeah, so we feel actually excellent about that. It should be pretty immediate, especially for the contracts that we have signed and obviously for Medicare itself. So for Q1 and Q2, we would expect to see the bulk of the step-up there. We continue to make progress with other payers where we are not covered right now, and obviously that proposed increase that will come into effect January 1 will also help with those negotiations. So we would expect it to be a kind of Q1 and Q2 kind of impact, primarily Q1 though.

Adam Wieschhaus
Adam Wieschhaus
Executive Director at UBS

Thank you. You also mentioned that Detect interest remains ahead of expectations, but you do not intend to chase demand by overspending. How are you measuring kind of response to the initial rollout and deciding how aggressively to scale that investment up?

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah, it is similar to how we approach everything. When we say disciplined, what we want to do and one of the unique positions we are in is obviously we are funding all these initiatives ourselves. The free cash flow negative was a one-time event because we did that initial inventory purchase, and we feel great about how Detect is going. What we are doing is we are continuing to assess, obviously with our partners, the pull-through, and we feel good about that, and we are continuing to expand the partnerships as well. We will work through that in Q4. Also, with the actual ad campaign, we launched that in selected markets. We have not broadly launched it fully yet, and we will continue to assess that on a quarterly by quarterly basis.

Luke Power
Luke Power
CFO at Caris Life Sciences

One of the key things, and we said this on last quarter's call, is we are always aware of kind of the potential for this test and the capacity constraints on it. That is why we are taking the disciplined approach with rolling it out market by market, and we will continue to assess that as we go into the end of the year and next year.

Adam Wieschhaus
Adam Wieschhaus
Executive Director at UBS

Thank you.

Operator

Thank you. One moment, please. Our next question will be coming from the line of Casey Woodring of JPMorgan. Please go ahead.

Casey Woodring
Casey Woodring
VP at JPMorgan

Great. Thank you for taking my questions. I guess the first one, can you just elaborate on the MCED launch, and if you can get specific, how many MCED tests did you sell in the quarter, and I guess what is baked into the Q4 guide?

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah, Casey, there is nothing baked into the Q4 guides. Right now, as we said in the prepared remarks, we are going to include it in the research line until we have more and more activity flow through before we break it out. We will continue to assess that. There is nothing in the guide for Q4 for it.

Casey Woodring
Casey Woodring
VP at JPMorgan

Okay, understood. Then I think if I am doing the math right, pharma R&D Q4 revenue is something in the $20 million-$30 million range. I guess that implies a pretty big cut to the full year number. So maybe just walk through kind of what you are seeing in the pharma R&D service business to end the year and expectations for that business line moving forward. Thank you.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. Casey, so you have seen the trends, like since the beginning of the year, that has also improved sequentially from a revenue standpoint. It is a business that we have obviously not been focused on in the past, but we are starting to gain traction. One of the key things that we were focused on coming into the year is not focusing on smaller deals, but more larger long-term deals. The sales cycle for those continue to be kind of a little bit longer. Going into Q4 with that guidance, we feel really good about that stepping up to over 100% growth, and we think we can maintain that momentum then as we continue to build out the team into 2027. I think from an overall standpoint, we feel really good about where our revenue at is on a total basis.

Luke Power
Luke Power
CFO at Caris Life Sciences

That is where I feel confident, obviously, with the guidance, and that is why the only range is around that pharma, because we have a couple of deals working through the pipe, and it is more of a timing issue.

Casey Woodring
Casey Woodring
VP at JPMorgan

Understood. Thank you.

Operator

One moment for the next question. The next question will be coming from the line of Albert Hu of Citi.

Albert Hu
Albert Hu
Analyst at Citi

Hey, perfect. Thanks for taking the question. Maybe just jumping off Casey's question on MCED. You guys currently have that in the pharma R&D side of things. When do you guys expect volumes for MCED to really ramp up here? Is this going to be like a 2028, 2029 situation when the reimbursement likely comes on, or how are you guys thinking about that going forward? Appreciate it.

Luke Power
Luke Power
CFO at Caris Life Sciences

No, again, Albert, like what we're doing with MCED, it's self-pay, it's direct to consumer. It's different from what others are doing, because one of the key reasons we're doing that is we want to make sure it's focused on the technology. Technology should drive, obviously, the science, and it should drive how you approach the market. So that's one of the differentiation factors here versus all the other approaches that are out there that are utilizing the same sales force and going to PCP. We do expect it to continue to ramp. Again, that's dependent upon how quickly we want to put our foot on the gas from a campaign standpoint. That's where we said in the prepared remarks, we're not going to overspend by doing this, but we're going to do it smartly.

Luke Power
Luke Power
CFO at Caris Life Sciences

We feel really good about where it's at today and that increased penetration that we're seeing. So I would expect it to continue to ramp throughout the next couple of quarters. Again, we'll assess it as we get into 2027, how much we want to spend on the ad campaign, but we're going to be smart about it.

Albert Hu
Albert Hu
Analyst at Citi

Okay, that's helpful. Thank you. Then maybe as a follow-up, so last quarter you mentioned that there are some sequencing competitors out there with higher throughput, with lower cost compared to the dominant supplier that you guys are on right now. Is there any sort of switch in process for you guys that's happening, AKA, do you expect COGS to come down further because of this, or what's the thoughts on COGS going forward? Appreciate the call.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. I definitely think there's opportunity on the COGS front. I think we stated this on previous earnings calls, we're technology agnostic. I think more competition is better, and we continue to assess. So there's definitely opportunity as we progress into 2027 and beyond, and it's going to continue to come down. But again, our focus right now is to create the best technology, not focus on cost. You see that from our next, our upgraded version of Caris Assure. Again, we went deeper, not cheaper. We could have made that and improved the margin, but again, we want to get the data. We want to ensure it's the best test on the market. So we always utilize that approach before we actually start focusing on the unit economics.

Luke Power
Luke Power
CFO at Caris Life Sciences

But I think as we progress into 2027 with all our tests on the market, that's where you'll start to see the benefit flow through to margin, and we feel pretty confident about that regardless of supply vendor.

Albert Hu
Albert Hu
Analyst at Citi

All right. Thanks so much.

Operator

Thank you. One moment for the next question. Our next question is coming from the line of Mark Massaro of BTIG.

Meaghan Rockey
Meaghan Rockey
Analyst at BTIG

Hey, this is Meaghan on for Mark. Thank you for taking our questions. Following the positive FDA adcom, we'd be curious to learn if that might give you any desire to pursue FDA pathway and approval for Detect.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah.

David Spetzler
David Spetzler
President at Caris Life Sciences

So-

Luke Power
Luke Power
CFO at Caris Life Sciences

I definitely. Yeah, go ahead.

David Spetzler
David Spetzler
President at Caris Life Sciences

Oh, you can do it, Luke. It is fine.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah, obviously, I definitely think we consider it, but as I previously just stated too, I think our focus is always going to be on the technology first rather than the FDA pathway in order to secure reimbursement down the path. I think if you focus on reimbursement initially, it could limit the kind of performance of your test because you are trying to create a test inside a particular margin. Again, that is not our approach. So the FDA is not in our near-term future for that. But again, we will continue to assess the overall macro environment as it progresses over the next couple of years.

Luke Power
Luke Power
CFO at Caris Life Sciences

Right now, our focus is on obviously returning out the ACHIEVE-2 interim readout in Q1, hopefully early Q1, and then completing that study and then expanding with what Dr. Spetzler said about the ACHIEVE 3 and ACHIEVE 4 to show the continued performance of a Whole Genome approach, which is unique. So I think that is more our strategy right now around the trials, and we will assess the FDA pathway as we progress through that.

Meaghan Rockey
Meaghan Rockey
Analyst at BTIG

Understood. Thank you for that color. We were also, again, on Caris Detect, it was nice to see the ad campaign launch. Just curious if you have any color on the feedback of the launch and, yeah, anything you have heard that can speak to that.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah, feedback has been positive. Again, it is a unique approach. I think people appreciated that. That is some of the kind of key feedback we are getting. The performance in stage one and stage two is obviously the best key metric for any early-stage detection test, and that is why David said in the opening too, that is our focus. It is early stage one and stage two, where you can make a difference. So I think there has been a positive response to that. Again, we are being disciplined with how we roll this out, and we are going to continue to increase the marketing behind it, but not overspend, as David said in the opening. So it has been positive. We will continue to assess, and then we will continue to monitor it going forward.

Meaghan Rockey
Meaghan Rockey
Analyst at BTIG

Great. Thank you, guys.

Operator

One moment, please, for the next question. Next question is coming from the line of Dan Brennan of TD Cowen. Please go ahead.

Daniel Brennan
Daniel Brennan
Managing Director at TD Cowen

Great. Thank you. Thanks for the questions. I joined late, but I think I am caught up. Maybe just on the fourth quarter volume guide, the 65,000, which is consistent. I know there is a step up there. You guys must feel good about the expanded sales force, but is there a cushion in that number since the number this quarter was just about what you guys expected on the volume side? Price was a big upside driver. Just thinking about the fourth quarter volume, how you guys feel about that.

Luke Power
Luke Power
CFO at Caris Life Sciences

Feel very good about that. We will guide to what we expect the numbers to be. The 65,000 is the expectation along with the Because it flows with our plan at the beginning of the year, which we obviously beat, again, by a percentage point in Q3. We continue to assess, and we continue to believe that 20% is kind of the guide number for now. As we progress throughout the quarter, we definitely feel very positive about our volume numbers.

Daniel Brennan
Daniel Brennan
Managing Director at TD Cowen

Good stuff. Thanks, Luke. I think there was a question asked earlier about potentially 20% volume growth in 2027. I know you guys are not guiding, but at the same time, I know you have also talked about taking a conservative stance when you get to the point of guiding. So any way to think about, like, will there be some natural kind of cushion that you do bake in for next year, or is your point you are just going to use this year's number and just kind of roll that forward?

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. We will assess that then at the end of the year. I definitely think we could look and see where we are at with the new launches. We feel really good about them, especially monitoring and MRD coming down the pipe. I think as we get into next year, that is where we will focus on, okay, what are we going to guide to from the new products? Where do we feel like the therapy selection business is? We will kind of assess it that way.

Daniel Brennan
Daniel Brennan
Managing Director at TD Cowen

Got it. Yeah. If there is a 20, whatever the number is, it is going to incorporate, it will have therapy selection plus these others in there. Will you break out therapy selection in the guide when you do it?

Luke Power
Luke Power
CFO at Caris Life Sciences

No. I think what we will do, as it grows, we will continue to assess it, but I think initially, we will take the path that we are taking right now, where it is a total clinical volume number.

Daniel Brennan
Daniel Brennan
Managing Director at TD Cowen

Got it. Okay. You guys did not give an MSAT number this quarter. I know it is asked three or 4x, right? Was there a number given or no?

Luke Power
Luke Power
CFO at Caris Life Sciences

No. No.

Daniel Brennan
Daniel Brennan
Managing Director at TD Cowen

No. Okay. All right, guys. Thanks a lot. Appreciate it.

Operator

One moment, please, for the next question. Our next question is coming from the line of Evie Koslosky of Goldman Sachs. Please go ahead.

Evie Koslosky
Evie Koslosky
Analyst at Goldman Sachs

Great. Thanks for taking my questions. So first, maybe talk through your conversations with health systems ahead of the Caris Confirm MRD launch. Maybe how much appetite is there to simplify suppliers from their perspective, given you have the full portfolio of tests? And maybe also talk through the performance of the test versus peers in the space and generally how you're viewing the competitive environment.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. Brian, do you want to take the customer focus and then-

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

Hey. Yeah. Hey, Evie. Hey, it's Brian. We have very strong and very broad institutional and individual medical oncologist relationships that, in many respects, have anticipated the rollout of our technology, whole exome, whole genome, 23,000 genes across a broader product line. There's an embedded demand on the part of all of these relationships for an MRD/monitoring type of solution. We expect that introduction, I wouldn't even call it a launch, I'd say it's an introduction and provision of the Caris platform more broadly across those same institutions, same oncologists, and in some cases, same patients. I'm very excited about that. It will help us in terms of volumes. It'll help us in terms of just our presentation as a strategic partner.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

It fits neatly into those conversations at both the senior leadership levels at the institutions as well as with the individual medical oncologists. I'm very excited about that. I think the differentiated technology is super exciting, as well as just the completion of the continuum of care. That's how we feel about it. I think it's just a very natural thing for our existing sales force to have in the bag. We'll probably, just like with Caris Assure, this fits within the specialty sales team for Assure, which we're continuing to build. As part of the investment program, more FTEs within the sales force.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

We're also building out the specialty team, so I think that's going to be part of the strategy and investment program on the commercial side as well, all of which will, I think, be very, very helpful for a variety of reasons.

Evie Koslosky
Evie Koslosky
Analyst at Goldman Sachs

Okay, great. On Detect, I know you mentioned the advertising campaigns were really only launched in a few markets. I guess when should we expect you to get to kind of the full 100% launch of those campaigns? Also maybe talk about the global opportunity within Detect versus more of the U.S. opportunity and where you would expect to see the initial demand there.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. I can take that, Evie. I think what we'll do is we'll continue to be assessing it as we continue to roll out and make sure we have enough capacity for running it. Again, it's a differentiated assay in its Whole Genome, so it's a lot of sequencing. We'll continue to assess that from the capacity front with the rollout, and then that will align with how we do from a marketing standpoint and continue to expand markets there and expand into partnerships there. You're 100% right. Obviously, we're focused on the U.S. market right now with the digital platform we're doing. But I think there's a huge opportunity to expand. That's not in our plan right now.

Luke Power
Luke Power
CFO at Caris Life Sciences

In the next couple of quarters, we're focused on the U.S. market, but there's definitely opportunity as we get to the end of 2027 to start considering additional strategic partners outside of the U.S.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

I mean, Evie, it's Brian. Evie, we've had significant reach out from large groups outside the United States, more generally, but also as it relates to Detect and MCED. I don't think it should be a surprise that there's strong interest in longevity, health span, and MCED, as well as our technology as it relates to Caris Detect. I think the other thing worth pointing out, and we've talked a little bit about the technology and the campaigns, but the other thing that's going on that we're spending a lot of time and effort on is building the channel. As you know, we're not taking an individual PCP type of approach, but rather developing strategic relationships with channel partners that often have organized the PCP. So we're working with the digital platforms, concierge medicine groups, longevity companies, et cetera.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

This market is scaling very rapidly, very significant membership, and they're looking for a solution. They're looking for the best technology. They're looking for MCED as a part of their overall strategy, and they want a better MCED solution than what's currently available. I think we, with our early-stage sensitivity, fit very neatly within that. We have many conversations going on. They're all positive. What's happening, I think, to be more specific about it, is we're developing those relationships and we're getting onboarded, right? In many cases, they have SADs, they have a process, so we're getting onboarded. They're very interested in the technology. All of that is building, and I'd say there's a lot of momentum as it relates to onboarding those various channel partners.

Evie Koslosky
Evie Koslosky
Analyst at Goldman Sachs

Great. Very helpful. Thank you.

Operator

One moment, please, for the next question. Our next question is coming from the line of Tycho Peterson of Jefferies. Please go ahead.

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies

Hey, thanks. Thinking about Caris Assure for therapy monitoring, how should we think about the attach rate with therapy selection testing? I mean, is there a general rule of thumb that you're keeping in mind as you roll this out? Is it 2:1? How do you think about that?

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. Brian, do you want to take that one?

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

Listen, Tycho, that is a great question. We think it is going to be quite significant, because it is very natural, given the interest in our technology, to follow through with monitoring. I do not think we have a specific answer to that, but we think that given the initial reaction and just the logic associated with this, we think that attach rate could be quite significant.

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies

Okay. Then, one for Luke on margins. I mean, just thinking about the gives and takes here. I mean, you are rolling out three tests without reimbursement out of the gate. Obviously, Detect is cash pay, but then you have the Everly Health partnership, so splitting the economics. Can you maybe just get us comfortable with the margin outlook? I know you do not want to talk a lot about 2027, but how do we get comfortable it is not dilutive to margins significantly as you roll these out?

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. Again, it is because of the disciplined approach we will take, Tycho, with everything. So, one of the key things that we will continue to assess is obviously the improvement in sequencing technology, which I think will benefit. It was a question asked earlier. We are definitely seeing that play out, and we definitely think that will have a positive impact on our existing products today and on our new products as well, from a sequencing cost standpoint.

Luke Power
Luke Power
CFO at Caris Life Sciences

I think the second thing too is obviously we continue to execute across the billing and market access groups, and I think with our existing products itself and with obviously the up increase in the 5250 rate for Caris Assure effective January 1, that will also help kind of soften the blow of launching these products without reimbursement, and that is kind of our plan, is to continue to manage it smartly.

Luke Power
Luke Power
CFO at Caris Life Sciences

I do not expect a massive deterioration as we go through this. Then I think actually we could see improvements on the sequencing technology. Obviously, if MRD is a very recurring product that you could have a lot of tests out of the gate, but we will launch this in a smart way with select customers and continue to roll it out customer by customer rather than a broad launch initially while we work through the reimbursement pathway. It is similar to what we are doing with monitoring. It is a similar approach. So again, we will be smart about it. I do not expect massive deterioration at all though.

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies

Okay. I'll leave it at that. Thanks.

Operator

One moment for the next question. The next question is coming from the line of Paige Chamberlain of Wolfe Research. Please go ahead.

Paige Chamberlain
Paige Chamberlain
VP at Wolfe Research

Hi, guys. Thank you so much for the time and the question. We're all clearly very focused on Detect. I'm going to ask another one if you'll allow it. If I'm recalling correctly, there was a comment on the 2Q call around current revenue capacity. I think it was specific to Detect, and the comment was $1 billion in revenue capacity, which at a $3,500 ASP implies something like 300,000 tests. Am I square on all of that math and that volume number? Anything we should be thinking of in the ballpark anytime soon? Thank you.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah, I think that's where we want the capacity to be, Paige. I think that's what we're striving for. You can see that reflective in our CapEx expenditures. It's one of the key things we're focused on as we roll out, not just Detect, but also the other products that are recurring, is increasing the sequencing capacity to support that potential. So, that's something we're working towards. It's not something we have today, but that's what we're working towards over the next kind of couple of quarters and what you've seen over the past couple of quarters with our CapEx spend.

Paige Chamberlain
Paige Chamberlain
VP at Wolfe Research

Awesome. Thank you. I am just going to squeeze in one more. On the sales force expansion, so I heard the latest number this quarter, 325. You must be liking what you are seeing because the original number I think you guys were targeting was 300. I would love detail on what sort of metrics you are seeing that are encouraging the continued expansion, and is 325 sort of a stopping point, or are you guys still hiring? Thank you so much.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

Yeah. Hey, Paige, it is Brian. We are liking what we are seeing a lot. We have so many different things to where we think the market is very accommodating. We see a large and growing TAM with increasing adoption of precision oncology programs as well as just more profiling on the part of individual medical oncologists. Our platform overall has many different edges, from technology to scale. I think our channel itself with all the relationships is a huge competitive edge for us.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

But as you know, the FTEs had drifted down there for a while right before the IPO, so we are continuing to build in, and we are seeing a real ROI associated with that. We do not see any end in sight for that, so we are going to continue to hire. Our Chief Commercial Officer is organized. We are going to expand the number of territories.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

We will expand the number of FTEs. We see the opportunity in the market for sure. It is only growing, and we think we have a significant number of edges, so that we do not see any reason to not continue to put the various pieces in place to provide the technology to more institutions and more oncologists.

Operator

Thank you. One moment. The next question will be coming from the line of Jack Meehan of Nephron Research. Please go ahead.

Jack Meehan
Analyst at Nephron Research

Thanks for squeezing me in, guys. Wanted to ask about the volume question a different way. Maybe out in that 61,500 tests that you reported, is it possible to tease out what non-therapy selection contribution there was? The reason I ask is, building off Dan Brennan's question earlier, just looking at the sequential step-up in Q4, I assume that is expanding, just getting a little color on how that is trending would be really helpful.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah, Jack. So, if you take, that's the reason why we commented on the mix trend from the first couple of quarters. It's consistent with that trend, what you saw from Q1 to Q2, and then that following all the way to Q3. We expect that trend to continue into Q4.

Jack Meehan
Analyst at Nephron Research

Okay. As an unrelated follow-up, I did want to ask you about the supplies on the balance sheet. Obviously, you did some stocking last quarter. It looks like you did more stocking this quarter. The inventory kind of weeks on hand is elevated. Was curious maybe just your philosophy around stocking, why you're doing this, and whether you think that could be a source of cash at some point.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. Yeah, again, it's ahead of the launches. One of the key things is obviously with the Detect launch, we got it prepared, but the other thing too is these are the same kits that we're going to run for our ACHIEVE-2 samples, which we've started to run. So, that's kind of a key focus for us in Q4, is to get that interim readout as quickly as possible. Also with the new Assure launch as well, that's on the NovaSeq X platform as well. So, I think what you saw this quarter with the inventory is just kind of general step-up. It's kind of consistent with what we've done before that big ramp-up in Q2. Yeah, we paid down obviously quite a bit of it, and you can see that reflected in the accounts payable.

Luke Power
Luke Power
CFO at Caris Life Sciences

That dropped close to $38 million, and that was on purpose. That is why we feel very confident about being positive free cash flow again. We do not expect to do that ramp at the end of the year.

Jack Meehan
Analyst at Nephron Research

Thank you, Luke. Appreciate it.

Operator

Thank you. One moment, please. Our next question will be coming from the line of Kyle Mikson of Canaccord. Please go ahead.

Alex Vukasin
Alex Vukasin
VP at Canaccord

Hello, this is Alex Vukasin. I am on for Kyle Mikson. Congratulations on the quarter and the recent test launches. Thank you for taking our questions. Just circling back to the first question of the Q&A, understanding you aim to provide less granular detail going forward, one of the key factors that we continue to monitor going into next year is the tissue therapy selection test volume expansion. You stated in the prepared remarks, therapy selection opportunity remains rich. Just what gives you confidence you can continue to expand the base tissue aspect of the business going forward? Could it take additional commercial investment? Is mid-double digit yearly test volume expansion sustainable for the blood side of the therapy selection business in the near to the interim, or could we perhaps see a bit of a slowdown? Thanks.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah, I think what we've shown is obviously the acceleration, and that was in our comments, the acceleration across both from Q2. So, that was positive, and tissue was obviously accelerating too, which is kind of our expectation with the investment that we're doing, but with the reorganization and the realignment. So, I definitely think tissue will continue to improve into the end of the year, and I definitely think it can continue to improve going into next year based on what we're seeing. I think from an overall standpoint, blood is obviously growing at a faster rate. It's starting from a smaller base, but we're continuing to see that growth accelerated in Q3 from Q2. So again, that's a testament to the work of the sales team. I think we'll continue to add to the sales team. As Brian mentioned, we're not going to stop at the 325.

Luke Power
Luke Power
CFO at Caris Life Sciences

We're going to keep adding based on what we're seeing from the inbound and from the orders and from the penetration in the institutions. So, we feel great about both going forward, but we won't be disclosing a growth rate for each of those individually. It'll be on a total basis.

Alex Vukasin
Alex Vukasin
VP at Canaccord

Thank you. So, you've obviously been able to achieve a lot of innovation internally, yet it's important to note that you maintain a substantial cash position which provides you with optionality. Could you elaborate on your M&A mandate or criteria? Generally, if you're open to acquiring technology externally to either boost current offerings, perhaps planned offerings for launch, or launch products available commercially, for performance and competitive reasons, or just to expand the test menu? Thanks.

Luke Power
Luke Power
CFO at Caris Life Sciences

Yeah. Go ahead, Brian.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

I was just going to say, look, this market has grown, and it is definitely consolidating. So there is more M&A, which I think is healthy, because a number of these companies without a commercial channel really need to find a home. They have no real viability on a standalone basis. So there is plenty of opportunity. We have not used it as a tactic for a whole variety of reasons, including the fact that we have not seen anything that we thought would be incrementally helpful to us, particularly from a technology perspective. So, our founder here is always focused on developing and pioneering this market and creating the best technology, and I think we are going to continue to do that. So with that mentality and with our leadership position with respect to technology, it is just hard to find things that would be incrementally useful.

Brian Brille
Vice Chairman and EVP at Caris Life Sciences

That is despite the fact that we have a skill set here, starting with David's experience in building companies through M&A. So there is certainly no reluctance or lack of capability. It is simply just opportunistically, we think we are better off devoting our time, resources, attention to an organic building strategy. But it is a possibility, and if something comes up that is relevant, we are certainly capable, both with respect to our own human capital as well as our financial capital.

Alex Vukasin
Alex Vukasin
VP at Canaccord

Great. Thank you.

Operator

This does conclude today's conference call. Thank you so much for joining. You may now disconnect.

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