Castle Biosciences (CSTL) Q4 2019 earnings summary

Executive summary

• FY19 revenue reached $51.9M versus $22.8M in FY18; gross margin was 85.9%, and net income was $5.3M, including a $5.2M non-cash debt-extinguishment gain.

• Test-report volume rose to 17,055 from 13,445; the July 2019 IPO raised $65.9M net and supported a year-end cash balance of $98.8M.

Financial highlights

• Revenue increased 127.6% to $51.9M, primarily from higher test volume and per-test revenue; about 94% of the increase came from DecisionDx-Melanoma.

• Operating income was $7.3M versus an operating loss of $3.8M in FY18; net income was $5.3M versus a net loss of $6.4M.

• Operating cash flow was $7.0M versus cash used of $12.3M; cash and equivalents ended FY19 at $98.8M versus $4.5M.

• Basic EPS was $0.35; diluted EPS was a loss of $0.21, reflecting the different diluted-share calculation and treatment of potential common shares.

Outlook and guidance

• Two late-stage tests for high-risk SCC and suspicious pigmented lesions were targeted for commercial launch in 2H20, subject to clinical study timing and results.

• Operating expenses are expected to rise substantially; significant expenses and operating losses are anticipated over the next two years as commercial and R&D efforts expand.

• Existing cash and anticipated product sales were expected to fund operating expenses for the foreseeable future, subject to assumptions and reimbursement outcomes.

• 2020 revenue-covenant targets were set by lenders; management expected covenant compliance for at least the next 12 months.