Castle Biosciences 2025 Q1 Earnings Misses Targets as Net Income Falls 920%

Castle Biosciences (CSTL) reported its fiscal 2025 Q1 earnings on May 5th, 2025. The company posted earnings of -$0.90 per share, missing estimates of -$0.07 by $0.13. Revenue increased to $87.99 million, exceeding estimates by $6.04 million, and guidance was adjusted upward to $287-$297 million for 2025. Despite revenue growth, the company faces challenges in net income performance with a widened loss of $25.85 million.

Revenue

Castle Biosciences reported a total revenue increase of 20.6% in 2025 Q1, reaching $87.99 million compared to $72.97 million in 2024 Q1. The dermatologic segment contributed $62.96 million, while the non-dermatologic segment added $25.03 million in revenue. Overall, the company achieved total net revenues of $87.99 million.

Earnings/Net Income

Castle Biosciences experienced a significant downturn in earnings, with losses deepening to $0.90 per share in 2025 Q1 from a loss of $0.09 per share in 2024 Q1. The net loss expanded to $25.85 million, marking a 920.0% increase from the previous year's loss of $2.53 million. The EPS performance indicates a challenging quarter for the company.

Price Action

The stock price of Castle Biosciences declined by 3.35% during the latest trading day, experienced a 6.67% drop over the past week, and has fallen 7.13% month-to-date.

Post-Earnings Price Action Review

The strategy of purchasing Castle Biosciences shares following earnings releases and holding for 30 days has led to substantial losses over the past five years. Specifically, this approach has resulted in a -60.06% return, underperforming the benchmark by a significant margin of -145.92%. The strategy's Sharpe ratio of -0.32 reflects poor risk-adjusted returns, underscoring the high risk involved and notable losses incurred. Additionally, the maximum drawdown of -89.10% highlights the considerable volatility and downside risk associated with this investment strategy, suggesting that caution is warranted for potential investors.

CEO Commentary

Derek Maetzold, Founder, President & Chief Executive Officer, expressed optimism about Castle Biosciences' performance, stating, "We are off to an exceptional start of the year," with revenue growth of 21% driven by a 33% increase in test report volume. He highlighted the strategic acquisition of Previse, aimed at enhancing the company's position in gastrointestinal health, and emphasized a commitment to maintaining financial discipline while pursuing growth initiatives. Maetzold noted the success of their DecisionDx-Melanoma test and the importance of ongoing education and awareness efforts, reinforcing a confident outlook for the company's trajectory in 2025.

Guidance

Castle Biosciences raised its revenue guidance for 2025 to a range of $287 million to $297 million, up from $280 million to $295 million. The company anticipates high single-digit volume growth for DecisionDx-Melanoma and expects gross margins in the mid-70s range for the remaining quarters. Additionally, adjusted net loss per share is projected at $0.20. The company remains committed to delivering positive net cash flow from operations for the full year 2025, despite challenges associated with reimbursement for DecisionDx-SCC.

Additional News

Castle Biosciences announced the acquisition of Capsulomics, Inc., d/b/a Previse, a gastrointestinal health company focused on chronic acid reflux related diseases, including esophageal cancer. The acquisition aims to enhance Castle's offerings within its GI vertical by leveraging Previse's methylation technology developed at Johns Hopkins University School of Medicine. The transaction is expected to close soon, with terms undisclosed. Additionally, Castle earned a Top Workplace USA award for the fourth consecutive year, highlighting its commitment to fostering a positive workforce culture. Furthermore, Castle actively supported educational initiatives during Esophageal Cancer Awareness Month, collaborating with various organizations to promote education and advocacy.