CareDx (CDNA) Q3 2026 earnings review
CareDx raises its profit outlook, while older collections still help
CareDx, which makes blood tests for organ transplant and cancer patients, grew faster than its own plan after swapping a low-margin product unit for a cancer diagnostics business. Sales from businesses owned a year ago jumped 45% by our math, while operating cash profit doubled to $30 million as overhead fell as a share of sales. Chief executive John Hanna raised the full-year profit outlook by $23 million, though by our math the plan still implies fourth-quarter profit stepping down to $21 million.
| Sales from businesses owned a year ago | +45% by our math (+39% reported to $139.4M) |
|---|---|
| Operating cash profit (Adjusted EBITDA) | $30.5M 22% of revenue, vs $15.3M a year ago |
| Prior-period testing revenue | $15.0M vs ~$8M plan and $6M a year ago |
| Full-year outlook | Raised $30M revenue $520–530M; cash profit up $23M to $90–100M |
⚖️ Verdict: 🟢 Bullish
The story got better because core transplant testing sped up even without help from older insurance collections, while the new NavDx cancer test hit $12 million in sales and moved onto CareDx's billing system ahead of schedule. One caution: collecting $15 million from older tests—nearly double what the company's own plan pointed to—shows the plan was cautious, not that the reliance on catch-up cash is over, and unpaid customer bills jumped.
The question now is whether regular test billing and cancer test pricing can keep operating cash profit near 20% of sales once catch-up collections fade. Either electronic hospital connections and in-house cancer billing hold profit near third-quarter levels, or margins drop back to the 15% implied for the fourth quarter. Fourth-quarter results and the 2027 outlook will settle it.
🐂 Bull Case
Transplant Testing Accelerates Even Without Catch-Up Collections
CareDx makes blood tests that check whether a patient's body is rejecting a transplanted organ. Reported revenue grew 39% from a year ago, but that headline hides a faster business because the company sold its Lab Products unit on June 30 and bought cancer test maker Naveris on July 1.
- Sales from businesses owned a year ago: up 45.4% from a year ago by our math, compared with 39.3% reported growth
- Transplant testing revenue excluding older collections: $92.2 million, up 39.3% from a year ago by our math
- Total test volume: 75,900 tests, up 50.9% from a year ago and above the 72,600 plan
Chief executive John Hanna cited "continued growth in Transplant" alongside new clinical studies for AlloSure Kidney and broader hospital adoption of Epic Aura, an electronic ordering tool. By our math, underlying transplant testing growth sped up from 28% last quarter to 39% this quarter, proving that current patient testing is accelerating on its own.
What to watch: the exact split between transplant tests and cancer tests in the quarterly filing or call transcript. A transplant figure above 58,000 tests would confirm that electronic hospital connections are driving volume faster than the company's plan.
Cost Discipline and Portfolio Swap Lift Profit Margins
Selling the lower-margin Lab Products business and adding more tests on the same lab network pushed profitability past the company's old long-term goal. Adjusted EBITDA, which is operating cash profit before one-off items, doubled to $30.5 million, or 21.9% of revenue, up from 15.3% a year ago.
The diagnostic group said the gain was "driven by revenue growth, higher gross profit and disciplined operating expense management". Gross margin excluding one-offs rose 3 percentage points from a year ago to 74%. By our math, general and administrative overhead excluding one-offs fell by 2.8 percentage points of revenue to 18.0%, while research and development fell by 1.0 percentage point to 14.4%.
What to watch: operating expenses excluding one-offs in the fourth quarter. Holding overhead near 54% of revenue as catch-up collections fade would keep operating cash profit margin near the 20% mark entering 2027.
NavDx Cancer Test Hits Plan and Finishes Billing Move Early
On July 1, CareDx paid $160 million in cash to buy Naveris, the maker of NavDx, a blood test that tracks viral-driven throat and neck cancers. In its first quarter under CareDx ownership, Specialty Oncology contributed $12 million in revenue, beating the $11.2 million implied by management's initial modeling assumptions and putting the test on track for its $24 million second-half target.
More importantly, the company completed "the migration of NavDx to the CareDx billing platform" during the third quarter, ahead of its original fourth-quarter schedule. Moving NavDx off an outside billing contractor onto CareDx's own collections system is the step required to lift average payment per cancer test from under $800 toward $1,000, while new AlloHeme cell-therapy and HistoMap kidney tests remain on track, "targeting CLIA readiness before year-end".
What to watch: fourth-quarter Specialty Oncology revenue against the $12 million implied by the second-half target. Faster growth now that billing runs on CareDx's own platform would show that collection rates per cancer test are already rising.
🐻 Bear Case
Prior-Period Collections Still Carry a Quarter of Growth
"We delivered another strong quarter of solid execution," Hanna said. Yet $15 million of the quarter's $119.2 million in Testing Services revenue came from collecting cash on tests performed in earlier periods, up from $6 million a year ago and nearly double the $8 million management modeled three months ago.
Beating the $8 million modeling assumption says the assumption was cautious, not that the reliance on older claims is over. Those catch-up collections supplied 11% of total revenue and dropped straight into profit. Because they must eventually wind down, the raised full-year outlook still implies fourth-quarter revenue dipping to $136 million and operating cash profit falling from $30.5 million to $20.8 million by our math.
What to watch: fourth-quarter prior-period testing revenue against the $4 million modeling assumption set last quarter. A drop to $4 million will test whether regular current-quarter billing can hold operating cash profit margin above 15%.
Receivables Jump and Lower Cash Conversion After Cancer Deal
While accounting profit jumped, cash generation slowed down in the third quarter. Free cash flow—operating cash flow minus capital spending—was $11.1 million, or 8.0% of revenue, down from $28.7 million last quarter and $36.1 million a year ago.
The main drag on cash was unpaid customer bills. Accounts receivable rose 38.8% from last quarter to $47.7 million by our math, even though total revenue rose only 5.6% over the same three months. Absorbing Naveris and moving its cancer test onto the in-house billing system tied up working capital, while $5.5 million in deal and legal fees also weighed on cash.
What to watch: accounts receivable and cash collections in the fourth quarter. A drop in unpaid bills now that the NavDx billing migration is complete would show the third-quarter cash slowdown was only a temporary handoff delay.
Risks this quarter didn't answer
Because the earnings release does not include the full quarterly filing notes or call remarks, five standing issues got no new numbers today.
- Epic Aura hospital connections: no live center count to compare against the 17 centers last quarter and the 30–40 year-end target; the call transcript will show it.
- Standalone transplant test volume: bundled with cancer tests inside the 75,900 total; the filing's revenue breakdown will show whether core transplant volume beat the 58,000 target.
- Payer refunds reserve: accrued and other liabilities rose from $41.8 million at year-end to $87.6 million, and the filing's footnote will show how much of that is the third-party payer refund reserve vs Naveris milestones.
- Natera patent appeal: no update on rival Natera's court appeal over $96.3 million in disputed past damages; the filing's legal footnote will carry any change.
- Long-term 2027 margin target: no mention of the old 20% operating cash profit margin goal for 2027, which the fourth-quarter outlook will finally test.
👓 Other Themes
Settled Medicare Policy Supports Higher Test Pricing
After Medicare finalized its coverage policy for AlloSure and AlloMap transplant tests in the middle of the year, CareDx removed a $7.5 million reimbursement headwind from its second-half plan. In the first full quarter under the settled rules, revenue per test rose 9.5% from a year ago to $1,570 by our math, even after mixing in lower-priced cancer tests.
💲 Other KPIs
Up 30.9% from a year ago and 4.9% from last quarter, driven by CareDx Pharmacy services. Growth slowed from 50.1% in the second quarter and 33.5% in the first quarter as the business lapped a larger base, and its gross margin excluding one-offs was 23.9%.
Up 9.5% from $1,435 a year ago, but down 8.7% from $1,720 last quarter by our math. Adding NavDx cancer tests, which carry a lower price than transplant tests, pulled the average down from the second quarter as management previously indicated.
Down from $373.6 million at the end of June after CareDx paid $160 million in cash to close the Naveris acquisition on July 1, but up from $201.4 million at year-end 2025 thanks to the June sale of Lab Products. The company continues to carry zero debt.
🔮 Guidance
Raised. The middle of the range moved up $30 million to $525 million, or 38.2% growth for the year. By our math, that leaves $136 million for the fourth quarter, up 25.5% from a year ago (or 30.3% excluding the sold Lab Products unit). It is the third raise this year: +$24M, +$39M, +$30M.
Raised. The middle of the range rose $23 million to $95 million, or 18.1% of revenue, nearly triple last year's $31.7 million. By our math, that leaves $20.8 million for the fourth quarter, a 15.3% margin vs 21.9% in the third quarter as prior-period collections taper. Third raise this year: +$12.5M, +$22M, +$23M.
❓ Key Questions
How many tests were transplant versus cancer in Q3?
CareDx reported 75,900 combined tests against a prior modeling assumption of 58,000 transplant and 14,600 Specialty Oncology tests. Investors need the exact split to know whether core transplant volume accelerated past its 17% growth rate.
How many transplant centers are now live on Epic Aura?
Management previously targeted 30 to 40 connected centers by year-end, up from 17 in July. Because each electronic connection typically lifts a hospital's test volume by 10%, the third-quarter count shows how much growth is locked in for 2027.
Why did unpaid customer bills jump by $13 million?
Accounts receivable rose 39% from June to $47.7 million while quarterly revenue grew 6%. Management should explain how much of that build came from adding Naveris versus slower payment from health insurers.
What is the fourth-quarter assumption for prior-period collections?
Catch-up collections brought in $15 million against an $8 million assumption in Q3. Knowing how much prior-period cash is baked into the raised $520–530 million revenue outlook tells investors the true fourth-quarter run rate.