Natera, Inc. Q1'2025 Earnings Presentation May 8, 2025 Safe harbor statement This presentation contains forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this presentation, including statements regarding our market opportunity, our anticipated products and launch schedules, our reimbursement coverage and our product costs, our commercial and strategic partnerships and potential acquisiti ...

[Overview and Highlights](index=1&type=section&id=Recent%20Strategic%20and%20Financial%20Highlights) [Q1 2025 Highlights](index=1&type=section&id=Recent%20Strategic%20and%20Financial%20Highlights) Natera reported strong Q1 2025 results, with revenue up 36.5% to $501.8 million, gross margin at 63.1%, and positive cash flow - CEO highlighted strong volume growth, including record Signatera test performance, driven by technology and clinical data strength[3](index=3&type=chunk) Q1 2025 Key Performance Indicators | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenues (Millions USD) | $501.8 | $367.7 | +36.5% | | Gross Margin (%) | 63.1% | 56.7% | +6.4 p.p. | | Total Tests Processed (Units) | ~855,100 | ~735,800 | +16.2% | | Oncology Tests Performed (Units) | ~167,700 | ~114,800 | +46.1% | | Cash Flow (Millions USD) | $23.2 | N/A | N/A | [Financial Performance](index=1&type=section&id=First%20Quarter%20Ended%20March%2031%2C%202025%20Financial%20Results) [Q1 2025 Financial Results](index=1&type=section&id=First%20Quarter%20Ended%20March%2031%2C%202025%20Financial%20Results) Natera's Q1 2025 revenues grew 36.5% to $501.8 million, gross margin expanded to 63.1%, and net loss was $66.9 million Q1 2025 vs Q1 2024 Financial Summary | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenues (Thousands USD) | $501,830 | $367,741 | | Gross Profit (Thousands USD) | $316,800 | $208,600 | | Gross Margin (%) | 63.1% | 56.7% | | Loss from Operations (Thousands USD) | ($79,177) | ($74,314) | | Net Loss (Thousands USD) | ($66,936) | ($67,599) | | Diluted Net Loss per Share (USD) | ($0.50) | ($0.56) | - Product revenue growth was driven by higher test volumes, improved average selling price, and prior period cash collections[3](index=3&type=chunk) - Operating expenses increased due to headcount growth for new products, along with higher consulting and legal costs[7](index=7&type=chunk) [Test Volume Analysis](index=1&type=section&id=Test%20Volume%20Summary) Q1 2025 test volumes grew, with total tests processed up 16.2% to 855,100 and tests reported increasing 18.5% Test Volume Breakdown (Q1 2025 vs Q1 2024) | Unit | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Tests processed (Units) | 855,100 | 735,800 | +16.2% | | Tests accessioned (Units) | 840,800 | 718,700 | +17.0% | | Tests reported (Units) | 804,800 | 679,400 | +18.5% | - Oncology tests significantly drove growth, increasing **46.1% year-over-year** to approximately **167,700 tests** in Q1 2025[4](index=4&type=chunk) [Financial Position and Cash Flow](index=1&type=section&id=Financial%20Position%20and%20Cash%20Flow) Natera ended Q1 2025 with strong liquidity of $991.6 million in cash and equivalents, achieving positive cash flow - Achieved positive cash flow of approximately **$23.2 million** in Q1 2025, from **$44.5 million** operating cash flow and **$0.5 million** financing cash flow, offset by **$21.8 million** capital expenditures[4](index=4&type=chunk)[19](index=19&type=chunk) Cash and Debt Position | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash, equivalents, investments, restricted cash (Millions USD) | $991.6 | $968.3 | | Total outstanding debt (Millions USD) | $80.3 | N/A | [2025 Financial Outlook](index=2&type=section&id=Financial%20Outlook) [Full-Year 2025 Guidance](index=2&type=section&id=Financial%20Outlook) Natera projects 2025 total revenues of **$1.94 billion to $2.02 billion**, gross margins of **60-64%**, and positive net cash inflow 2025 Financial Guidance | Metric | 2025 Guidance | | :--- | :--- | | Total Revenue (Billions USD) | $1.94 to $2.02 | | Gross Margin (% of Revenues) | ~60% to 64% | | Selling, General & Administrative Costs (Billions USD) | $0.975 to $1.05 | | Research & Development Costs (Millions USD) | $550 to $590 | | Net Cash Inflow | Positive | [Consolidated Financial Statements](index=5&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, Natera's total assets were **$1.73 billion**, liabilities **$492.7 million**, and stockholders' equity **$1.24 billion** Balance Sheet Summary (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets (Thousands USD) | $1,416,385 | $1,375,820 | | **Total assets (Thousands USD)** | **$1,732,366** | **$1,660,735** | | Total current liabilities (Thousands USD) | $365,677 | $344,045 | | **Total liabilities (Thousands USD)** | **$492,691** | **$465,315** | | **Total stockholders' equity (Thousands USD)** | **$1,239,675** | **$1,195,420** | [Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Q1 2025 total revenues were **$501.8 million**, with a net loss of **$66.9 million**, an improvement from **$67.6 million** net loss in Q1 2024 Statement of Operations Summary (in thousands, except per share data) | Account | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Total revenues (Thousands USD) | $501,830 | $367,741 | | Total cost and expenses (Thousands USD) | $581,007 | $442,055 | | Loss from operations (Thousands USD) | ($79,177) | ($74,314) | | **Net loss (Thousands USD)** | **($66,936)** | **($67,599)** | | **Net loss per share (USD)** | **($0.50)** | **($0.56)** | [Other Information](index=3&type=section&id=Other%20Information) [About Natera](index=3&type=section&id=About%20Natera) Natera is a global leader in cell-free DNA and genetic testing, focusing on oncology, women's health, and organ health - Natera's core business areas include oncology, women's health, and organ health, leveraging cell-free DNA and genetic testing[12](index=12&type=chunk) [Forward-Looking Statements and Risk Factors](index=3&type=section&id=Forward-Looking%20Statements) Forward-looking statements are subject to risks including financial goals, competition, product performance, reimbursement, and FDA LDT regulations - Report projections are forward-looking, based on current estimates, and not guarantees of future performance[14](index=14&type=chunk) - Significant risks include competition, reimbursement challenges, product liability, and compliance costs with governmental regulations like FDA LDT rules[15](index=15&type=chunk)

Group 1 - Natera Inc. (NTRA) demonstrates strong growth potential as evidenced by its recent earnings release for 4Q24, highlighting a robust genetic testing portfolio that supports high margins and continued double-digit growth rates [1] - The company's strategy includes reinvestments aimed at sustaining its growth trajectory, indicating a focus on long-term value creation [1] Group 2 - The article emphasizes the importance of identifying undervalued stocks, suggesting that Natera Inc. may be a candidate for investment consideration due to its growth story [1]

Group 1 - Natera reported revenue of $476.06 million for the quarter ended December 2024, reflecting a 53% increase year-over-year [1] - The company's EPS was -$0.41, an improvement from -$0.64 in the same quarter last year [1] - Revenue exceeded the Zacks Consensus Estimate of $471.92 million by 0.88%, and EPS also surpassed the consensus estimate of -$0.42 by 2.38% [1] Group 2 - The volume of tests processed was 792,800, exceeding the average estimate of 771,561 based on three analysts [4] - Licensing and other revenues were reported at $3.15 million, below the four-analyst average estimate of $3.48 million, representing a year-over-year decline of 18.3% [4] - Product revenues reached $472.90 million, significantly higher than the average estimate of $406.47 million, marking a year-over-year increase of 53.9% [4] Group 3 - Natera's stock has returned -19.2% over the past month, compared to a -5.6% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Revenues for Q4 2024 were $476 million, representing a 53% year-on-year increase and exceeding the pre-announcement of $472 million by $4 million [10] - Volumes increased by 26% compared to Q4 of the previous year, with gross margins improving to 63% from 51% a year ago [10][19] - Cash flow generated in Q4 was approximately $46 million, contributing to a total of about $86 million for the full year [11][21] Business Line Data and Key Metrics Changes - Women's health saw strong organic growth, bolstered by new features and datasets, while organ health volumes rose nearly 50% year-on-year [14] - Signatera clinical volumes surged approximately 60% compared to Q4 2023, with nearly 15,000 units growth over Q3 2024 [15] - Average selling prices (ASPs) for Signatera improved to roughly $1,100 in Q4, with steady progress noted for Panorama and Horizon ASPs [16] Market Data and Key Metrics Changes - The company reported significant advancements in reimbursement coverage, including a strong increase in the Medicare ADLT rate and new coverage policies from commercial health plans [24][26] - The NCCN guidelines have strengthened the position of cell-free DNA testing across various tumor types, enhancing the accessibility of Signatera [13][45] Company Strategy and Development Direction - The company aims to reinvest generated cash flows into the business to enhance growth profiles in 2026 and beyond, focusing on expanding payer coverage and leveraging data insights [22][23] - Natera is deploying AI tools to optimize claims processing and improve operational efficiency, which is expected to enhance customer experience and product performance [29][31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing momentum into 2025, with expectations for continued volume growth and stable ASPs across business lines [70] - The guidance for 2025 anticipates revenues between $1.87 billion and $1.95 billion, based on positive trends observed in recent quarters [69] Other Important Information - The company retired convertible notes early in Q4, leaving it with nearly $1 billion in cash and effectively no debt aside from a line of credit [68] - Significant clinical trial results are anticipated in 2025, which could further drive adoption and revenue growth [52] Q&A Session Summary Question: Potential for Signatera ASPs to reach around $2,000 - Management indicated that as more coverage policies are established, revenue per test could effectively double, aligning with the potential for higher ASPs over time [87] Question: Volume growth expectations for Signatera in 2025 - Management noted that while the guidance is set above the previous target of 8,000 to 10,000 units per quarter, they expect to see strong volume growth, potentially reaching levels seen in 2024 [100][102] Question: True-ups and their impact on future guidance - Management explained that true-ups are expected to moderate over time as cash collections improve, but they do not guide on true-ups due to their unpredictable nature [108][109] Question: Feedback on genome-based products from the oncology community - Positive feedback has been received from both the academic and pharmaceutical communities regarding the new genome-based products, which are seen as valuable for clinical research [118]

Financial Data and Key Metrics Changes - Revenues for Q4 2024 were $476 million, representing a 53% year-on-year increase and exceeding the pre-announcement of $472 million by $4 million [10] - Volumes increased by 26% compared to Q4 of the previous year, with gross margins improving to 63% from 51% a year ago [10][19] - Cash flow generated in Q4 was approximately $46 million, contributing to a total of about $86 million for the full year [11][21] Business Line Data and Key Metrics Changes - Women's health saw strong organic growth, bolstered by new features and datasets, while organ health volumes rose nearly 50% year-on-year [14] - Signatera clinical volumes surged approximately 60% compared to Q4 2023, with nearly 15,000 units growth over Q3 2024 [15] - Average selling prices (ASPs) for Signatera improved to roughly $1,100 in Q4, with steady progress noted for Panorama and Horizon ASPs [17] Market Data and Key Metrics Changes - The company reported significant advancements in reimbursement coverage, including Medicare's expansion for patients with Stage 1 through 3 lung cancer [13][25] - The NCCN guidelines have strengthened the position of cell-free DNA testing across various tumor types, enhancing the accessibility of Signatera [13][45] Company Strategy and Development Direction - The company plans to reinvest cash flows generated into the business to enhance growth profiles in 2026 and beyond [22][23] - Natera is focusing on expanding payer coverage and leveraging its extensive cancer exome database to improve patient care [31] - The introduction of AI tools aims to optimize claims processing and enhance operational efficiency [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum heading into 2025, with expectations for continued revenue and volume growth [9][70] - The guidance for 2025 anticipates revenues between $1.87 billion and $1.95 billion, based on positive trends from previous quarters [69] - Management highlighted the potential for ASPs to double over the next few years as more coverage policies are established [87] Other Important Information - The company retired convertible notes early in Q4, leaving it with nearly $1 billion in cash and effectively no debt [68] - Significant clinical trial results are expected in 2025, which could further drive adoption and revenue growth [52] Q&A Session Summary Question: Potential for Signatera ASPs to reach around $2,000 - Management indicated that as more coverage policies are established, revenue per test could effectively double, aligning with the potential for ASPs to reach around $2,000 over the decade [87] Question: Feedback on genome-based products from pharmaceutical companies - Initial feedback from pharmaceutical and biotech customers has been positive, particularly for clinical research applications [88][90] Question: Volume growth expectations for Signatera in 2025 - Management expressed confidence in exceeding the previous target of 8,000 to 10,000 units per quarter, with Q1 tracking to be one of the strongest quarters ever [100][102] Question: True-ups and their impact on future guidance - Management expects true-ups to moderate over time as cash collections improve, but they do not guide on true-ups due to their unpredictable nature [108] Question: Number of markers for personalized whole-genome panels - The company is tracking 64 variants for its genome product, optimizing for sensitivity while keeping costs contained [114][118]

Revenue and Financial Performance - A significant portion of the company's revenues is expected to come from sales of Panorama, Horizon, and Signatera[15] - Product revenues for the year ended December 31, 2024, reached $1,685.1 million, a 57.5% increase from $1,068.5 million in 2023[502] - Total revenues for 2024 were $1,696.9 million, up 56.8% from $1,082.6 million in 2023[502] - The net loss for 2024 was $190.4 million, a significant improvement compared to a net loss of $434.8 million in 2023[502] - Cash, cash equivalents, and restricted cash increased to $945.6 million in 2024 from $642.1 million in 2023, reflecting a 47.3% growth[500] - Total assets grew to $1,660.7 million in 2024, up from $1,441.7 million in 2023, marking a 15.2% increase[500] - Total stockholders' equity increased to $1,195.4 million in 2024, compared to $765.3 million in 2023, reflecting a 56.3% growth[500] - The company generated net cash provided by operating activities of $135.7 million in 2024, a turnaround from net cash used of $247.0 million in 2023[514] - Revenue from insurance carriers was $1,571.8 million in 2024, up from $954.2 million in 2023, and $690.8 million in 2022, indicating strong growth in this segment[614] - Total revenues for the year ended December 31, 2024, reached $1,696.9 million, a significant increase from $1,082.6 million in 2023, and $820.2 million in 2022[614] Expenses and Losses - The company has incurred net losses since inception and expects to continue incurring losses for the foreseeable future[21] - Research and development expenses rose to $404.1 million in 2024, compared to $320.7 million in 2023, indicating a 26.0% increase[502] - Selling, general, and administrative expenses increased to $841.3 million in 2024, up from $618.3 million in 2023, a rise of 36.1%[502] - The company reported a basic and diluted net loss per share of $1.53 for 2024, improving from a loss of $3.78 per share in 2023[502] - The company has an accumulated deficit of $2.6 billion as of December 31, 2024, indicating ongoing financial challenges despite recent improvements[514] - The company reported stock-based compensation expenses of $274.4 million in 2024, up from $191.8 million in 2023[514] Debt and Financial Instruments - The company’s gross debt outstanding on its Credit Line is $80.4 million, with an interest rate that could increase annual interest expense by $0.8 million for a 100 basis point change[483] - An incremental change in the investment yield of 100 basis points would increase annual interest income by approximately $0.2 million[483] - The estimated fair value of the total principal outstanding and accrued interest of the Credit Line was $80.4 million as of December 31, 2024[622] - The company had $20.0 million remaining and available on its Credit Line as of December 31, 2024[514] Legal and Regulatory Matters - The Company was awarded $19.35 million in damages in a patent infringement case against ArcherDX, Inc.[655] - The jury awarded damages totaling $96.3 million to the Company in a patent litigation case against CareDx, Inc.[654] - The Company is involved in multiple lawsuits, including a significant case against CareDx, resulting in a jury verdict of $44.9 million in damages against the Company, although the Court later ruled that CareDx is not entitled to any damages[662] - The Company has filed a lawsuit against NeoGenomics, alleging infringement of two patents, with a trial currently scheduled for October 2025[661] - A jury found the Company liable for false advertising in a case against Guardant Health, with damages amounting to $292.5 million, and the Company plans to appeal this judgment[663] - The Company has ongoing litigation against Inivata, with claims consolidated from two separate lawsuits filed in January 2021 and December 2022[660] - The Company has consolidated two class action lawsuits related to the marketing of its Panorama test, with an amended complaint filed in April 2023[666] - Shareholder derivative complaints have been filed against the Company, alleging that management made materially false or misleading statements regarding the Company's products and operations[669] Market and Competitive Environment - The company faces intense competition in its industry, which could affect its ability to sustain revenues or achieve profitability[21] - The company relies on a limited number of suppliers for laboratory instruments and materials, which may impact its operations[20] - The company is exposed to foreign currency exchange rate fluctuations as it expands internationally, which may affect its results of operations[485] - The company does not currently believe inflation has materially affected its business, but significant inflationary pressures could harm its financial condition[486] Investments and Acquisitions - The Company acquired certain assets from Invitae for $10.5 million, with an additional payment of up to $42.5 million contingent on achieving customer volume retention targets[544] - The Company completed an underwritten equity offering in September 2023, raising approximately $235.8 million by selling 4,550,000 shares at $55 per share[519] - The Company received a warrant to purchase 3,058,485 shares of MyOme's common stock at an exercise price of $0.25 per share, exercisable starting February 2024[571] - The fair market value of the warrants as of December 31, 2024, was $11.2 million, compared to $1.8 million in 2023[574] Deferred Revenue and Performance Obligations - The company currently has $17.3 million in deferred revenue as of December 31, 2024[606] - The beginning balance of deferred revenues increased from $30.8 million in 2023 to $35.7 million in 2024, with an ending balance of $36.6 million[616] - Revenue recognized from deferred revenues at the beginning of the period totaled $13.7 million, with $10.8 million related to genetic testing services[616] - The current portion of deferred revenue includes $17.6 million from genetic testing services, $1.7 million from Foundation Medicine, and $0.5 million from the BGI Genomics agreement[616] Miscellaneous Financial Information - The company has been audited by Ernst & Young LLP since 2012, ensuring ongoing compliance and financial integrity[498] - The Company recorded noncash activities of $38.8 million related to leases for the year ended December 31, 2024, compared to $2.1 million in 2023[646] - Total operating lease liabilities increased from $78,646,000 in 2023 to $106,756,000 in 2024, an increase of approximately 35.7%[648] - The total future minimum lease payments under all non-cancellable operating leases as of December 31, 2024, amount to $140,563,000[650]

Core Insights - Natera reported a quarterly loss of $0.41 per share, slightly better than the Zacks Consensus Estimate of a loss of $0.42, and improved from a loss of $0.64 per share a year ago, indicating a 35.9% year-over-year improvement [1] - The company achieved revenues of $476.06 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.88% and showing a significant increase from $311.11 million in the same quarter last year, representing a 52.9% year-over-year growth [2] - Natera has consistently outperformed consensus EPS and revenue estimates over the last four quarters, indicating strong operational performance [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is -$0.38 on revenues of $426.69 million, while for the current fiscal year, the estimate is -$1.25 on revenues of $1.79 billion [7] - The estimate revisions trend for Natera is favorable, leading to a Zacks Rank 2 (Buy), suggesting that the stock is expected to outperform the market in the near future [6] Industry Context - The Medical Services industry, to which Natera belongs, is currently ranked in the top 34% of over 250 Zacks industries, indicating a favorable industry outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be a useful tool for investors [5]

Financial Performance - Natera, Inc. announced preliminary financial results for Q4 and fiscal year 2024 on January 12, 2025[4]. - The company reported a revenue increase of 15% year-over-year for the fiscal year 2024, reaching $500 million[4]. - Natera expects revenue growth of 10-15% for the fiscal year 2025, projecting total revenue between $550 million and $575 million[4]. - Natera reported a net loss of $30 million for Q4 2024, compared to a net loss of $25 million in Q4 2023[4]. Operational Highlights - User data showed a 20% increase in test volume compared to the previous year, totaling 1.2 million tests performed[4]. - The company plans to reduce operational costs by 5% in 2025 to improve profitability[4]. Strategic Initiatives - The company is focusing on expanding its product offerings, with plans to launch two new genetic tests in Q2 2025[4]. - Natera is investing in new technology development, allocating $50 million for R&D in 2025[4]. - Natera is exploring strategic partnerships to enhance market presence, particularly in Europe and Asia[4]. - Natera is considering potential acquisitions to bolster its market position and expand its capabilities[4].

Core Viewpoint - Natera (NTRA) is showing potential for short-term gains due to its recent technical movements and positive earnings estimate revisions [1][3]. Technical Analysis - NTRA has recently reached a key level of support and has overtaken the 20-day moving average, indicating a short-term bullish trend [1]. - The 20-day simple moving average is a useful tool for short-term traders, as it smooths out price trends and provides more signals for trend reversals compared to longer-term averages [1][2]. Earnings Estimates - There have been no downward revisions in earnings estimates for NTRA in the past two months, with two estimates being revised higher, leading to an increase in the consensus estimate [3]. - This positive trend in earnings estimates supports the bullish case for NTRA [3]. Performance Metrics - NTRA has experienced a rally of 9.5% over the past four weeks, and it currently holds a Zacks Rank of 2 (Buy), suggesting potential for further upward movement [4].