CDNA — Q2 2026 Financial Report Analysis

Overview

CareDx's second-quarter revenue rose 52% to $131.9 million, but two things inflate the headline. First, $18.0 million of the quarter's testing revenue came from collecting on tests performed in earlier periods (about $16 million after a $2.4 million addition to refund reserves). Second, GAAP net income of $110.6 million, or $2.07 per diluted share, is almost all a one-off: a $113.0 million gain from selling the lab products business to Eurobio Scientific, which closed on June 30. Strip both out and the business still improved clearly. Testing volume grew 17% to about 58,000 tests, management puts underlying testing revenue growth at about 28%, and gross margin widened by about 7 percentage points. Management raised full-year revenue guidance to $490–500 million, up from $447–465 million.

At a glance

• $131.9 million revenue, +52%. About $16 million of that is net catch-up cash from old tests, so this pace won't repeat every quarter. Management's own figure for underlying testing growth is about 28%.
• $110.6 million GAAP net income. $113.0 million of it is the gain on selling the lab products unit. Without the gain, operating income was about $0.3 million: roughly breakeven, though better than the $11.1 million operating loss a year ago.
• $30.6 million operating cash flow. That's up from $9.9 million a year ago. It was real cash, not an accounting gain, and it came with $373.6 million of cash and no debt at quarter-end, before $161.8 million was paid for Naveris on July 1.

What CareDx sells and what changed this quarter

CareDx makes blood tests that help doctors check whether a transplanted kidney, heart or lung is being rejected (AlloSure, AlloMap). It also sells software and pharmacy services to transplant centers, and until June 30 it sold laboratory kits used to match donors and recipients. This quarter it became a different company. It sold the kit business for about $171.7 million in cash, and the next day, July 1, it bought Naveris for $161.8 million in cash plus up to $100.0 million more if revenue milestones for 2026 and 2027 are met. Naveris makes NavDx, a blood test for HPV-driven head and neck cancer, which the 10-Q says Medicare covers at a national price of $1,800.

Results

n/m = not meaningful. A percentage change from a loss to a profit can't be calculated. Q2 2025 volume is implied from the 17% growth rate.

Testing services. Testing revenue rose $37.9 million. The 10-Q says this was "primarily driven by testing services volume growth of 17%". The gap between 17% volume growth and 61% revenue growth "was primarily driven by $18.0 million of increased net collections associated with tests performed and revenue recognized in prior periods" plus higher revenue per test, partly offset by a $2.4 million reserve for refunds owed to insurers. Under the revenue accounting rule CareDx uses (ASC 606), it books only the amount it expects to collect on each test. When insurers later pay more than expected on old claims, the extra lands in the current quarter. The base period runs the other way: in Q2 2025, CareDx cut revenue by $3.8 million for prior-period tests. So the year-over-year comparison is stretched at both ends. The company puts average revenue per test at about $1,720 including the catch-up. By our rough arithmetic, without it the figure would be closer to $1,450, compared with about $1,330 a year ago after adding back that year's cut. That's still a real price-and-mix gain, but a smaller one.

Patient and digital solutions grew $6.4 million (+50%), "primarily driven by higher pharmacy sales and growth in our digital solutions, particularly an expanded customer base from Ottr software." Pharmacy is a low-margin business: the cost of this segment rose 78%, faster than its revenue. Revenue minus the cost of this line was about $4.5 million, essentially the same as a year ago ($4.5 million), so the growth added revenue but no extra gross profit.

Costs. Cost of testing rose only 3% while volume rose 17%, which the 10-Q attributes to "continuous efficiency measures to lower laboratory expenses." That, plus the catch-up revenue, which has almost no cost attached, explains most of the gross-margin gain. Operating expenses grew quickly. Sales and marketing rose 38%, mostly $8.7 million of extra personnel costs. G&A rose 48%, including $5.6 million in legal and consulting fees. Across all lines, $11.1 million of "business development and portfolio optimization" costs from the Eurobio sale and the Naveris deal were excluded from the adjusted figures.

Takeaway: The 52% growth rate and the $2.07 EPS both rest on items that won't recur: about $16 million of net catch-up collections and a $113 million gain on the sale. The lasting improvement is narrower but real. Volume is growing 17% while lab costs barely move, and Medicare has now finalized coverage for CareDx's core tests. Whether that holds up without kit revenue, and with a new cancer-testing business to integrate, is what the second half will show.

What the headline numbers hide

• The gain on sale is the whole GAAP profit. Operating income was $113.2 million. Without the $113.0 million gain, it was about $0.3 million. The sale also caused a $3.8 million tax charge, which accounts for nearly all of the quarter's $3.9 million tax expense.
• The adjusted figures leave out a lot. Non-GAAP net income of $20.0 million excludes the gain (-$113.0 million), $10.7 million of stock-based compensation, which is a real, recurring cost to shareholders, and $11.1 million of deal costs. Adjusted EBITDA of $24.8 million (a 19% margin) also includes the full catch-up revenue. On our rough estimate, without the roughly $16 million of net prior-period revenue, which carries almost no cost, adjusted EBITDA would have been near $9 million. That's still better than last year's $5.3 million, but much less than the reported figure.
• Cash conversion is good for the quarter, ordinary for the half. Q2 operating cash flow of $30.6 million beat non-GAAP net income, helped by the catch-up collections arriving as cash. For the first six months, operating cash flow was $34.9 million against $113.4 million of GAAP net income. The gap is the non-cash gain: the $164.8 million of net sale proceeds appear under investing, not operations.
• Billing and reimbursement. Medicare's share of revenue fell to 30% from 34%. Refund reserves owed to insurers took $2.4 million out of Q2 testing revenue and $5.8 million out of the first half. The 10-Q discloses an ongoing "dispute with a significant Medicare Advantage payer," which "has also asserted entitlement to recoup additional previously paid claims." Two older matters closed. On April 23, 2026, the former employee's whistleblower (qui tam) False Claims Act suit, which the DOJ had declined to join in 2024, was voluntarily dismissed. The $20.25 million securities class-action settlement was paid in December 2025.
• Medicare coverage was finalized. On July 16, 2026, Medicare's contractors published a Final Local Coverage Determination, effective August 30, 2026. The 10-Q says it "affirms coverage across our transplant testing offerings in kidney, heart, and lung, including for-cause and surveillance testing, with defined coverage criteria." This removes an uncertainty that dates back to the August 2023 draft. The company warns that the "defined coverage criteria" could still limit how often a test is paid for.
• Buybacks helped EPS a little. CareDx bought back 0.6 million shares for $12.2 million in Q2, which used up the May 2025 program. On April 24, 2026, the board approved a new $100 million program. Diluted shares were 53.4 million, compared with 56.4 million on the prior-year non-GAAP basis, about 5% fewer. That accounts for a small part of the non-GAAP EPS rise from $0.10 to $0.37. Most of the rise came from operating profit.
• Receivables and inventory both fell, to $34.4 million and $7.0 million, but mostly because the kit business left with its share of them. Those balances can't be compared with last year's.

Outlook

Management raised 2026 guidance to $490–500 million of revenue (previously $447–465 million) and $66–78 million of adjusted EBITDA (previously $43–57 million). The release does not say how much of the increase comes from Naveris versus the existing transplant business, and it does not forecast future catch-up collections. First-half revenue was $249.6 million, of which $23.1 million came from the lab products that are now gone. So the guidance implies about $240–250 million in the second half, compared with $226.5 million in the first half excluding lab products. Four things to watch in Q3:

1. Testing revenue without catch-up. How much prior-period revenue remains, and whether underlying growth stays near the 28% management cited.
2. NavDx's first quarter inside CareDx. This is its first revenue contribution, and the start of integration costs in oncology, a market where the 10-Q acknowledges CareDx has "limited operating experience".
3. The Final LCD in practice. Whether the coverage criteria that took effect August 30 change how many surveillance tests Medicare pays for.
4. Cash after the deal. By our arithmetic, $373.6 million at June 30 less the $161.8 million Naveris payment leaves about $212 million before Q3 cash flow, alongside a new $100 million buyback authorization and up to $100 million in possible Naveris milestone payments.

Our view: the operating gains, flat lab costs on 17% more tests and a large gross-margin step-up, look durable. The size of the beat does not, because so much of it came from collecting old receivables. Profitability from here depends on testing growth continuing to outpace operating expenses that rose 33% on an adjusted basis this quarter.

Source: CareDx Form 10-Q for the quarter ended June 30, 2026, and the Q2 2026 earnings release (Form 8-K Exhibit 99.1), both filed July 30, 2026.