Tempus AI (TEM) 4 Nov 242024 Q3 Earnings call transcript

Thank you for standing by. My name is Briana, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Tempus AI Third Quarter 2024 Financial Results Conference Call. [Operator Instructions]. I will now turn the conference over to Liz Krutoholow. ahead. go Please

me Good Rogers, XXXX Briana. for welcome Tempus of -- to quarter Lefkofsky, are Thank and Founder Call. afternoon, This Quarter CEO joining The XXXX. Conference September and results from afternoon, Third Tempus ending Eric Jim you, Tempus XX, and today CFO. Tempus the released

uncertainties actual we I would are during to may management call, statements begin, like that that cause Before make to subject that differ materially. and risks this results to remind could forward-looking you

a for discussion the with XXXX reports XX, on of our For future these risks, file X, the XXXX, SEC. visit please November as XX-Q any we September well as quarter ended that filed

prepared these our with on Definitions earnings comparable in accounting at has principles. During most financial to are non-GAAP available accepted included accordance in website third SEC and financial call, the will not discuss generally of we along financial investor.tempus.com. is measures our directly non-GAAP been the the quarter with measures, GAAP furnished reconciliations to which are measures, release, which

to the I like turn now call Eric. over would to

all. Hi,

up. -- was from business unit acceleration we meaningful the true-ups pick which Just and was for of the excited before but I of session, I in the unit XX.X%, just $XXX.X million. delivered hitting we some to XX% XX%, about see unit was overall briefly for some that through quarter. were Genomics quarter growth growth. Q&A year, the of would last The QX from Tempus. quarter growth a run growth solid based growth thought We start highlights accelerated revenue last had to ASP terms upon We

which or accelerated growth, in a services by was last -- in and XX.X%, quarter. meaningful data at data notably led to our from year-over-year year acceleration which business, came last licensing insights revenue Our XX.X%

quarter-over-quarter. adjusted improvement also a was improvement delivered a $XX.X $XX.X negative EBITDA and also million year-over-year significant We of million, which

we've track of who's improving cash as on super quarter significant and an screening Genetics, we screening well well team actually time years. our world. know the acquire leader top we obviously, business largest the whose we're for march hereditary do for and a past excited acquisition come announced reference over the we them the have that for quarter that, or with as to news, and hereditary our Ambry business They're to So On join to agreement EBITDA have signed flow in the big lab spent breakeven. we the we and are toward our the just and understanding few adjusted the

the our growing of that AI they growth, The but accelerate even our today that business given from business and to significant Applications is adjusted path EBITDA. synergistic XX%, flow fantastic is at our EBITDA across more generate over sequencing breakeven business. time, than more They Data products cash all also is our to is which and business meaningful

is of have they've that also you proprietary business making our business the rare growth where has but and in one things achieved a actually model space So money. significant a Genomics

And combination $XXX in $XXX for year. in early paying million will positive. an for of million in vest the excited up and a be business, locked which occur cash we're also million on at X the QX will and adjusted flow million, million, We're closing, and that should of $XXX $XXX us the cash other which equity, $XXX EBITDA is which annualized the now basis

about revenue multiples paying, we're the and EBITDA. And roughly it's in of X.Xx XXx terms current

from largely to Ares. additional So we debt we buying finance price with feel and the at able like business business attractive are an the we're

is equity. our dilutive to not And materially so all the transaction at

fantastic a quarter. overall, So

have. that take any to happy on note, folks questions we're And

Instructions]. [Operator

Stanley. from comes question Morgan Savant of with first Our the line Tejas

the with start I'll Ambry maybe news. Eric,

sure the congrats some First Ambry hereditary for the growth of faced light is cancer growth you some asset, walk which in announcement. on One that of market. in trends testing? have expanding cited of uneven of I'm XX% sustainability of the that get of you the the questions, into Can the through all, we us rationale peers the just of that

transaction? asset. you the And including into operated then at progress here second, your side arm's if also that plan expanding just push well-run integrating you'll a you readiness, that the can the continue these comment verticals the on and to MRD portfolio, somatic on while making Or organizational the is essentially length was will, new of

further sort and of about essentially it the road. generation talked integrating think the about EBITDA down You there

Yes.

happy So I'm to jump in.

we So current hereditary in fits within offer that first testing today. we platform Ambry -- genomics, currently squarely strategic our all, of for

have look for want physicians and one we xG, us to want our you oncologists going and it's it's comprehensive product to to are with can They're at categories. to if assay and called care of when lab can e-commerce, be want to there and them labs. not work We critical them want of treat patients main much early, And going offer patients an believe Amazon X beginning to labs help X in capture they're we've what's their because which the work that more thesis, with from treated, to teams kind they're to historically, of to analogy time central over to being very with that disease we work it's lab talked want end been be if we monitoring be profiling. those is we and believe our and going more their we that to about different

for to to It's somatic important important always an felt and It's testing have be therapy be in And to and MRD so monitoring. liquid in selection. be hereditary screening. important it's we

of our squarely within plans and this fits kind activities. So current strategic

look quite the business and their rate. is we at has market Beyond that, insights you to the more the actually relevant accelerating cancer landscape, inherited risk growth understanding. believe are And hereditary stable, if more been

us taking don't that of it grower signs big to any law the growth time. them, that's of others. though that some in numbers growth be are will there to will Ambry, market from true true to for seems space. is period going meaningful that and for and be certainly bring which a in for even be slow see think does We tend particular, so down we share down rates, And

there's think that systemic nothing deeply we kind saw And business of into in year was past really the dug to we some slowdown. led the us where that there

will business think make well, we grow. the fits money So it within more our will squarely will it and It, perform footprint.

monitoring for of as minimal the cancer thinking develop monitoring. well before earlier disease post end of of spectrum, catching other right terms them as which therapy patients detection okay, they they do, instead about is, In the when

-- in platforms product have have our kind we've response. cancer, our of in is is a assay, we in We IO other we're partnership X and talked -- own is lung different breast have One doing the own tumor-informed we're with tumor-naive colorectal Personalis our liquid ] that about and we historically, [ assay there. and

expansive. those And reimbursement and our our think it's The in capture portfolio MRD by hard to right strong. unshackle products. we achieve the been obviously until is we that it's reimbursement, gated really We believe We're quite and for products both portfolio share. Personalis have to demand

ramp coming meaningful And so get as a that more much and the I in will start would as portfolio. story we reimbursement years we it to be suspect really

the talked you I maybe it. then helpful. switching data you to renewal. think That's contract Merck the side of things guys gears Got about And EMD

bit another -- I again, grew million whether it's clarify that got of know direction. TCV got You expansion as and the be of that reassure north you $XXX sequentially? the Takeda it the intra-quarter, Can little in a BioNTech to the well. collaboration kind with one reiterated you would helpful of just but you moving investors right just was

for near-term dynamics you the of in one terms here. Jim, then And

the for a $XX of there's $XX questions quarter-over-quarter in the we the Data business. step-up fourth Services models of One embedded and million get million, quarter sort Street into that's is,

your So, would in gotten of biopharma weakness helpful. light other some players visibility of commentary from there in and of funding we've be the CROs mixed the some the just

was metric. that experiencing, business to data about a I'll that people start be a The been can with pressure other lot seen fortunate biotechs We continues Jim business going strong. the the so remains larger overall and little to some were bit really certainly public R&D were strong. it. we're the were there some then talk and have of when of overall historically have financial and business tailwinds but that immune not additional we tailwind budgets the Certainly, subside,

expect And sustain to data of in don't look fact, that. at you when XX% the growth almost we licensing our rate business

growth we rates come to the expect down. So

cushion And we've meaningful, where -- have given so got terms large building business in a we data we some durable, long a sit. fast-growing, good of

a and you direction. these is large that One up and think, And testament everything license, comes is data X-year to for so Merck, on moving overall, you quickly when expand adding say would it's a I really data has really up, a really, resign thing then value. the the nice is right I client renewal relationships it big

are businesses, data, companies. data And But whole just of products do. Jim that in. Data metric have and which differentiation. of the biotech data let the a it's at not we series And people don't obviously adding they Our look our what understand when value. we've lots most that we of And that pharmaceutical in $XXX terms tools weigh products of that's by million, usable really I'll and make overall main built

Yes.

north of was QX, of north revenue number of million it QX QX. at of noted We the the from million, we end So in QX. $XXX a there as at obviously $XXX still at end was lot of recognize the that

we So of bucket very of again, into million licensing. obviously years of next we the and good refill north that that to the continue at visibility forward-looking think several gives $XXX data level us

perspective. QX, pharma projects from In have Oftentimes, our budgets of terms follow the and cycling so step-up a data of our largest historically -- is quarter we QX budgeting to kind cycles. in

have QX this in so to a for the us not step-up is side. And licensing data atypical on

guys. That's it. helpful. time, Appreciate Got the

question the with of next line Rachel comes Vattenstal from JPMorgan. Our

Genomics Eric, core First the up on I unit mentioned growth believe that this quarter. business, accelerated you

what which there? break down uptake then out you you break faster for can that test you did further, can us the grow did sequentially? see volumes And portfolio So of down even

Yes.

volume total should exclude about testing. in tests MRD QX, was in XX,XXX QX. both We XX,XXX about So any that those of just numbers note

base. quarter-over-quarter it's we're core the so our far that xG quickly, coming then more growing and but as xR, from So xF growth assays, seeing xT,

most xR xF. coming of and it from So xT,

to we that in unit see. think I what we the expected And we quarter some see had and we saw of to quarter, foreshadowed to kind did Yes. expect nice additional Always lift last

reps hiring And it lower believe and XX Great. just new quarter. territory led you productivity roughly last of period some sales added initially, then the to my around sales some mentioned just the just ramp-up quarter, the during you And adjustments. follow-up, of guys in force. for I that the

your of trending point? levels force productivity of current of we XQ should terms well? at how in the see update this sales in year that as into an provide and you then terms into can So And next ramp

Yes, I start. can

mean, the as force month So more get productive every speed. trained is up getting certainly to sales to I get they

historically up efficient. to seen reps it it X little that months they'll to speed. have a compendium, broad We've take in really we We continue takes testing to X so get world, suspect time. a can more our And to got get

us be way in for in we're meaningful for meaningful that isn't It now. investments others metering might it our the

let's million you quarter, than say, $XX-plus were look quarters negative X business, we $XX-plus million. negative the If generating ago, at last

of over just it's Now $XX million EBITDA. negative

period adjusted So of here. short getting monthly own our to the consistent a on trend next EBITDA on positive in we're

obviously in not Let our that X,XXX. any alone large mean of that a X,XXX a might from chaos, that just reps we than at productivity lack Ambry sell just their It But in that bit. of might force causing financial making pulls kind the given thought sales investments or such we all. not quarter, less accelerant we're is forward

to And might go XX% XX% from XX% the so or rate to growth XX%.

to of the we've isn't this healthy forecast through looking be be like what fluctuations get that on we good isn't had got a financially productivity, a So to meaningful some at investment but for held. us really it that's we wordy path to relative to can because explain by massive

from line of Ryskin next the Bank America. Our of comes question with Michael

bit Ambry it's color your you've primary that existing on little appreciate in touched and lab. a with on earlier, your there the the I a with you've got on relationship the to financials are on It past, as reference them pretty Great deal. seems -- congrats relationship compelling. like want expand

versus they -- how think impact current the to to what their just that about be the going a what I want I next with year? relationship generated of generated model much external? year. is million we get generate is of to how much mean how I'm sense How is $XXX get should business trying much of at this revenue this sort you -- in you of incremental, is in expect Just right? to

Yes.

mean, obviously, move don't wouldn't breakdown every -- provided be things would -- of That our bit. -- mean it we more numbers vast majority these large around it part, I overlapping. So said, just the is test. create that haven't a like but not in the I so exciting, between We questions we exact

pretty we've portfolio. And got broad so testing a

So we to habit of single discussing every don't assay. a want in nuance quarter every be of single every single

newer or our that offering But said, hereditary a for inherited us. risk It cancer screening. was

Genomics Ambry's As ago, in small it's business our second a Jim vast not overall of and terms majority relatively is over. mentioned piece its of larger still of business. the

oncologists. in our through counselors would the volume I coming add also is call point is where testing that primary

we're very complementary what it's to So doing.

of just All out and sort particular some to how of on $X,XXX the things? over side it item continue And think Any Okay. -- the line about board -- think just XQ. improvement XX,XXX to in was going you or then nice called payer out ASP, Is on call improvement XQ that broad pace Genomics forward? Any on trends a going I to of business, should reimbursement right. of came expect? this the and sequential to tests, sort we uplift that particular

Yes.

in-network so Shield commercial So We covering couple kind some Illinois, progress Avalon, all reimbursement in last inherited from standpoint, therapy over xR,xF,xG,xT+. made months. of of of selection Blue all panels, xT, a the contracts our Shield we of cancer California, with Blue brought of payers

that of of little bit a improvement. so And quarter-over-quarter to led incremental kind

still the assay to We'll the process I volume 'XX. reminder, migrating of significant is is in pricing we're versus would CDx. in a step-up for This xT say there ADLT no that QX. $X,XXX a underway. targeting status, that start QX test

of kind be move to we the would of that accelerant there. a from kind that So meaningful version next as standpoint of reimbursement

Our of next line with Brennan the TD Cowen. question Daniel comes from

just just of can are think Maybe I deal your with growth plugging forward? And can top the guys presumably, of or about say that kind competitive. about Great. wanted that deal anything there line synergies going this associated on of terms Ambry, you in And process. what to about any in partnership, the you are we deal? kind just clarify given learn was not or

Yes.

So I'll cover the first couple.

competitive They, hired banks a of process. think, the at terms looked -- So a run in options. I process, Ambry their and did competitive

can You'd historic expert and a Konica but their -- Ambry have to at together. plus dig kind kind of of an dig I'm were business in I they one know of Minolta, some they're another had bolted But -- public company that comments. not so you into point, on

then period of split a to for think decided out. to it both time, were and they I looking sell

it a So process was it but a was it a turns. was twists process, and with

and and kind that comfortable -- our highly horizons was we of terms flow are. positive, watch really the we thought the products get going knew were us we journey we're going partner asset a to time a and performance with it watching be long in that interacting as well. and that to We know able a both synergistic to we under of business fortunate that We were was take way in the of accelerates over to were EBITDA to business that their right market we this our terms cash were acquire get the economics and were to which this business it them improving for closely. durable, We to to

combined you some business, the be X bit will the fully deck, expect a revenue, we haven't investor range. today of we to models built give and of our grow for take we even a of to business the in little at growth, if billion company we've top were look in about terms can in got combined color, though slides XX% kind yet we XX% the line $X the XXXX In

combined EBITDA adjusted and And be cash obviously, the flow will positive. business

diagnostics. spot. a AI and and in healthy We're bring we're at mission our So growing to to good on size continuing

of terms synergies. In

we certainly a synergies. term, business, are kind -- on on synergies, independently having of operate terms the In some for we so it's of near to plan there well-run plan but

they large have business. example, For don't a data

business of can we We data large Ambry have kind a into. that incorporate

largely in-network they're Additionally, an provider.

networks, their got So leverage is that about XX% side. to payers able very in of they've volume relationships good with hopefully the we're Tempus

synergies time, a -- centering Over while So that think there's not kind it's immediate of anticipating. what into we're baked very asset. of kind we

outlook of guide I maybe reiterated prepared the remainder that Got to press remarks, range then or business in of the you the kind cited in of just expect the year. million XX% the it. kind to in of And year? genomics a follow-up, you on for and maybe you release $XXX XX% the as just the think for the kind stay

we are then XX% to So data XQ thinking XQ? XX% is differently the that you the should guys Or be at? remaining about should we business growing solve for just conclusion can something about what be segment Genomics thinking in by and

That's your probably so we snapshot to a Liz a XX% take down. because to But quick expect think way don't this kind we of I I buy do that Genomics you up into. break call range, for segment, would in can XX% a be to after certainly, how question back of have

kind Yes, been we anticipate have shift in the businesses of any wouldn't where growing independently. significant QX of

Yes.

XX%. say, letter, you to I this, expect we I growing and our business be Although Data in at said shouldn't will the think,

Right.

unique lap we leading really I But how of far range companies mean focused super the that short-term and particular we opposed is when highly diagnostics. XX% hold that health it's to is more again, on and long-term the care in make the growth space as space are the long-term business performing bringing -- the in well. accelerants one want position We we business growth AI the given big given volatile. bring as to

Our Needham. line from next of MacDonald Ryan the with question comes

just seeing the to purchase? lands maybe buying to just any changes on Obviously, or right you some about larger nice which the you're But harder it, maybe you're in growth start if been to sort of that now. newer relative talk on how, last X the data Maybe And the deals making be months, notable purchasing XX bit if quarter. sort environment. have data call initial customers initial or might data side a can purchasing a in environment of seeing let's of

some No, don't strong in our big I I continued this of lots really data things clients certainly the we're mean, the wins to are certainly big like think -- new talked few -- in momentum, seeing us. last for great a but lots BioNTech win We've quarters, new interest of is wins portfolio. products. added for year, had good about a We've great like that

overall But of data. marketplace we're that same as is the buy few freely. that we're there's few biotechs gone no plethora the now And because looking they're just raised were was had have years biotechs, looking market when ago to there having or talk just with around I doesn't the different. a a that to just ago, A mentioned, capital preserve that capital capital flushed tailwinds question public when to you more it years flowing

shifts offer 'XX the capital So, fact And have I tailwind get more 'XX I products a we still data as some will value big a of our bodes free. suspect landscape that growing think, as well the market. maybe the this for becomes bit, just the would bit really or we're in that and that backlog,

then kind deal. our world, get in haven't People to little more goal in any an strategic even still bigger data of buy them bit then we some then and And to into relationship. patterns. seen of fundamental ventures a But and shift our tend

to you portion on they're Maybe the Medicine, a more sort small helpful announced cardiology monetization I bit as that of color. a think recognize arena, Really segment you this Northwestern a business is you collaboration utilizing of of But how like pathway little follow-up, and time? build app here form think Can of pathway over about sort the today. just it's with the And recently the to talk a the starting a collaboration? apps ECG-AF algo. about start can then within had

right. that's Yes, exactly

model more I advantage and think are that large how capabilities. treat these for figure out better onslaught recognize take to to of are their They generative trying medical more ability this patients, outcomes. of tools AI large to systems catalytic new to and language generate

that to there's into with in And products so And they're very their have scale, companies our that few figure trying arena. out size to bring practice. that our at how

really medical way to best to we relationships And deep Northwestern deployed. the we're some one. in so have fortunate of get centers trying out these best with all And the are figure world, the being models to

But suspect number now What's would models would have deployed at actually interesting, deployed a I've And in diagnostics. quarters scale. you'll enormous be first a over and world they'll few scale. in I I cells tremendous suspect these an be of are at of -- row, algorithmic really these think of availing this the coming years, I will our that said all, already people

That algorithmic still way the you because least without a figured to are of U.S., we revenue, have generating said, purely could of from the in for of at things benefit lot how haven't out, it revenue of people appropriately lots not may these be in millions these diagnostics. some that benefiting pay like

payers of things and these thinking is save commercial And we they the one is So and longevity reimbursed. improve applications they business our when of think to get be how outcomes, for side they we big they things spend they the and lot do add reimbursed. of moment watershed that I going improve do Medicaid should be time Medicare other to about value, a the demonstrate money, eventually

line comes Andrew William Brackmann Our the question with from Blair. of next

called start relationships the sort for you guys. can you Maybe that on further deck, just the along out this system to of Ambry. health In

those some how the how you sort about help provider at just accelerate of provider -- just maybe of for does can So high this those to essentially, better of a the this level, become maybe sort go-to grow partnerships, acquisition groups? or just talk you

Yes.

So they I obviously primarily We're of think primarily of on in payer Ambry out the network are the relationships side, lab. in-network terms that has an lab.

some of discussions, lot the history in they've payers. got in with So commercial of those a dealing

as oncologists. system before, the with call And primarily dealing health on we're primary mentioned then I is counselors side, point genetic they're or

just of So position with side, deepening the relationships strengthen ecosystem across kind entire we the kind those again, the with on provider hospitals. our we'll of believe

Yes. center. the -- this selection, NCI I responsible mean, inter-departments obviously, patients, a medical at of morning. large And you Center those are center. both cancer were was good cancer had hereditary groups I very Cancer and X both monitoring. example, for centers genomic And a academic now medicine and therapy centers, there of their cancer like patients screening MRD profiling and precision

like think their want like, patients about Words think screening, in to group out it's of bring medicines have how goes you different people figure over I Tempus. "Oh, that there. here right? It's So to cancer not the are groups, same Ambry about do precision trying it they to and that

small are And both vendors I And for lots can with typically think, in The a more me general can sequencing highly, so trend lots manner talk comprehensive providers. fewer and very of help end-to-end can a we're to in the as manner. comprehensively folks that opposed we them that people that integrated in lots having to regard. I help all that looking and synergistic is more work

just our this overall think platform. we strengthens And so

your on to question profitability. Great. want I earlier And a of sort to to go one back answers of then

change investments we Does sort of still forward? with march march towards should of sort philosophy? to of going Or of expect thinking how you So be about any sort balancing this we continue acquisition forward? should profitability this that

was either of invest generating ago, we in positive we were so some disciplined some basically produced which when looking and get to have we a told kind or on levels wouldn't instead our of folks that gross declining take which just folks done, leverage just path space were our that losses maintain we we way growth is the high we public, to months the mean, and we other that told were we actually so told -- dollar that go were went what X other more. loss I to profit EBITDA

felt given size just that sustainable we year, was prudent an was our and We milestone. not given scale to being XX important thought turn we're and and burning that money next going

want haven't to we We yet determined harvest profits. how

especially -- I little EBITDA a on sure to the relative given year. an focused kind wouldn't this with going to an We're in we we're next sustainable don't to of in So generate more rate, growth acquisition, EBITDA that on our in checked that but of the I We've invest sustain we crossed the we've think future, years not about million we're trying annualized want I and think I I hurdle. -- -- can we need several making generate cash EBITDA to $XX extra is, business, an say now harvest a flow basis, think how what can bit box. positive safely to positive,

So but you'll, run I want to and make think trade-offs a us I we we're good those see still think, disciplined business.

we'll hopefully, And so right think, find I balance. the

question of Westenberg Sandler. from comes the David next Our Piper with line

Dave. John is for on This

wanted the just recently in I some there's going all, you have to psychiatric between Myriad and Genetics getting issues on the playing for of industry conditions and thoughts out United any Do forward? been reimbursement pharmacogenomics GeneSight. First might ask, on reimbursement see how

I say that than more have one. Yes,

small and our of relatively any growth is rate. has disruption business a on impact reimbursement very of kind neuropsych overall so significant there our kind So in

out it last came this obviously, longer far plays out news kind where As week. of term, as

to impact business. remains how to on will be seen react and of it our it kind other all very minimal So payers that, a but

been secondly, also and billing for transcriptomics there's And talk genomics. it. for just lot a of Got about

to different And want of just about whack I you just out to So Can kind provides? of the you think your a value some that billing talk how relative question value your provides test different CGP ask this it in way. is with competitors?

of first set process. Medicare mean, -- rates all, billing CMS don't of of I part The of billing -- as MAX case okay, no, in the is -- think and set their rates. billing whack. by our our our the out we by billing We are by local Medicaid don't

got -- we billing avail both ourselves rates And NGS. actually and so we've We're in with X MolDx MAXs. in

by rate our some at at for reimbursement MAX end are blended of we tests our we whatever AMA follow And locally that are amount and codes, follow we has of all pathways y day, the then of test the some and the $X,XXX payers follow paid the So set at tests amount. x paid our paying.

just California, in the and Same of and DNA both in for example, our to our we paying our thing for thing those signed Jim liquid rate that Illinois discounted mentioned for Blue test case for test. Blue Medicare slightly test. folks Shield same some and RNA in So are like Cross

I now, many rates, many, commercial many, and those the times. independent look and established tests, same payers DNA around have So many, place. liquid tests, We've independent all at MAX our rigs of many kind test many, times, our had coalesced RNA our many, and mean,

our not test have forecasting or So what will up gains rates expect that's a be that's DNA and We status, they on we anything well arrive. go taken our we going do don't think long we our that. ADLT suspect bit the committing to will to approach established. of change ASP pretty with until with know that We don't

year, and see $X,XXX. has And But ascertained. we look and don't and then this fortunate we've there's $X,XXX, got that business at great. at look and if we're don't "Hey, high be it But can profitable ASP if a we're of now a it said, say what all around say, $X,XXX, we hey, you control we're just at that's see margin to we independently lift, We So it at can kind of this juncture. $X,XXX. kind we and we we're that's and

time so been. I it again, and time think And has

at further you that, questions Thank no have With will today's We conclude this conference time. participation. for we call. your all

You disconnect. now may