TLDR
- Record Q3 revenue of $439.8M, up 63.9% year-over-year
- Oncology test volumes increased 54.4% with 137,000 tests performed
- Gross margins reached record 61.8%, up from 45.1% last year
- Generated $34.5M in cash during Q3, company now debt-free
- Full-year revenue guidance raised to $1.61B-$1.64B
Natera (NASDAQ: NTRA) reported exceptional third-quarter results for 2024, with revenue soaring 63.9% to $439.76 million compared to $268.3 million in the same period last year. The genetic testing company’s performance substantially exceeded Wall Street expectations, leading to a 20% surge in its stock price.
The company processed 775,800 tests during the quarter, with oncology test volumes showing particular strength, increasing 54.4% to approximately 137,000 tests. Product revenues grew by 64.4% to $436.13 million, while licensing and other revenues rose 17.6% to $3.63 million.
Gross margins reached a record 61.8%, up from 45.1% in the previous year, demonstrating the company’s improved operational efficiency. The average selling price (ASP) for Signatera, the company’s key oncology test, reached approximately $1,050 before adjustments.
The quarter marked a turning point in cash generation, with Natera producing $34.5 million in cash flow. This achievement followed several quarters of breaking even, indicating improved financial stability. The company also retired its convertible notes early, effectively becoming debt-free.
Day Sales Outstanding (DSO) remained stable at approximately 73 days during the third quarter, reflecting efficient revenue collection practices. The company has maintained strong relationships with insurance payers, though it continues to manage ongoing challenges with prior authorization and medical records requests.
In response to the strong performance, Natera raised its full-year 2024 guidance. The company now expects revenue between $1.61 billion and $1.64 billion, representing about 50% growth for the year. Cash flow guidance was set at $50 to $75 million for the full year.
The company’s fetal rhd test, a recent addition to its product lineup, has seen strong market demand. This launch came at an important time for the prenatal testing community, adding to Natera’s comprehensive testing portfolio.
CEO Steve Chapman noted the company’s progress in penetrating the oncologist market, with about 40% of oncologists currently using Signatera. This suggests substantial room for further market expansion.
In the academic sphere, Natera’s research continues to advance. Recent breakthrough studies on colorectal cancer were published in Nature Medicine and presented at ESMO, reinforcing the company’s position in cancer diagnostics innovation.
The CFO highlighted that Signatera has become Natera’s largest revenue-generating product, contributing to overall corporate margin improvements. Management expects this trend to continue into 2025, supported by strong product margins and clinical data.
Weather events, such as hurricanes, remain a potential factor that could affect future quarterly results, though the company has shown resilience in managing such challenges.
The company’s success in managing costs while scaling operations has impressed analysts. The combination of growing test volumes, improving margins, and positive cash flow has strengthened Natera’s position in the diagnostics market.
Looking ahead, while acknowledging that growth rates may become more challenging as the base business expands, management remains confident in their execution strategy and market opportunity.
The upcoming 702 study results, expected to be shared at the ASCO GI conference, will report on Signatera’s ability to predict disease-free survival and overall survival benefits from Celecoxib treatment.
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