Tempus AI (TEM) , an innovator in artificial intelligence-based healthcare solutions, has been attracting investors' interest since its successful IPO in June 2024. The company’s stock has demonstrated impressive growth over the past six months, fueled by investor enthusiasm for AI-driven advancements and the company’s interesting financial performance.In the past six months, the stock has rallied 22.8%, outperforming the 16.5% rise of the Medical Info Systems industry and the benchmark’s 6.8% increase. In ...

Tempus AI, Inc.’s (TEM) investors have been encountering short-term losses from the stock of late. Shares of the Chicago, IL-based healthcare technology company focused on adopting artificial intelligence (AI) to advance precision medicine and patient care have plunged 28.9% in the past three months, underperforming the industry’s 0.6% gain. In the same time frame, the stock underperformed the sector and S&P 500’s 12.4% loss and 5.1% growth, respectively.Two major developments from TEM this month include th ...

Tempus AI TodayTEMTempus AI$33.03 -1.26 (-3.67%) 52-Week Range$22.89▼$79.49Price Target$56.00Add to WatchlistIn mid-August, around two months after Tempus AI’s NASDAQ: TEM initial public offering (IPO), the stock was up a marvelous 93%. However, shares have experienced wild volatility and are now 8% below their opening price of $37 as of the Dec. 18 close. Overall, Wall Street analysts seem to believe shares have fallen much too far. The average price target implies shares could rise 74% from their Dec. 18 ...

It is often difficult for investors to gauge success for recent IPOs, as there are many factors to take into consideration. In the event of Tempus AI (NASDAQ: TEM ), there are many long-term drivers to love aboutAnalyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than f ...

Acquisition Details - Tempus AI announced an agreement to acquire Ambry Genetics for $600 million, with $375 million in cash and $225 million in equity [1][2] - The deal is expected to close in Q1 2025 and will be financed through $300 million in short and long-term debt [2][6] - Post-acquisition, Ambry will operate as a wholly owned subsidiary of Tempus, retaining its employees and full suite of testing services [6] Strategic Benefits - The acquisition aligns with Tempus AI's vision of integrating diagnostic and treatment solutions, enhancing its capabilities in hereditary cancer testing and expanding into new disease categories [7][8] - Ambry's expertise in hereditary cancer screening, rare diseases, pediatrics, cardiology, and reproductive health will broaden Tempus' reach across multiple specialties [4][8] - The integration of Ambry's services will streamline workflows by reducing dependency on multiple laboratories, appealing to healthcare providers seeking comprehensive solutions [8] Financial and Market Impact - Tempus AI's shares surged 18.4% following the acquisition announcement and have risen 45.6% year-to-date, outperforming the industry's decline of 13.2% [1][3] - Ambry Genetics is projected to generate $300 million in revenues in 2024, with annual growth exceeding 25%, positioning Tempus to capture a larger share of the genetic testing market [9] - The global hereditary cancer testing market, valued at $3.5 billion in 2021, is projected to grow at a CAGR of 11.6% until 2031, reaching $10.1 billion, indicating significant opportunities for Tempus [10][11] Recent Developments - Tempus AI reported strong top-line growth in its Data and Services segment, with significant expansion in adjusted gross margin [12] - The company announced a multi-year collaboration with BioNTech to leverage its TCR dataset for BioNTech's oncology pipeline and extended its strategic agreement with Merck EMD [13] Industry Prospects - The rise in the geriatric population, increased cancer incidence, and higher government healthcare expenditures are key drivers of growth in the hereditary cancer testing market [10]

Financial Data and Key Metrics - Revenue growth of 33% YoY, reaching $180.9 million in Q3 2024 [6] - Genomics unit growth accelerated to 23.9% YoY, with overall business growth around 20% [6] - Data and Services revenue grew 64.4% YoY, driven by data licensing business growth of 86.6% [7] - Adjusted EBITDA improved to negative $21.8 million, a $14.4 million YoY improvement [7] - Acquisition of Ambry Genetics for $600 million ($375 million in cash, $225 million in equity) at 1.9x revenue and 15x EBITDA [11] Business Line Performance - Genomics business delivered 69,000 tests in Q3, up from 66,500 in Q2, driven by core assays (xT, xR, xF) [28] - Data licensing business growth of 86.6% YoY, with total contract value (TCV) remaining above $900 million [24][26] - Ambry Genetics acquisition expected to accelerate EBITDA and cash flow breakeven, with Ambry growing at over 25% and generating significant EBITDA [9][10] Market Performance - Ambry Genetics is a leader in hereditary screening, with 95% of its volume in-network and strong payer relationships [45] - Tempus' Genomics business is primarily out-of-network, with recent progress in securing in-network contracts with Blue Shield of Illinois, Blue Shield of California, and Avalon [40] - Combined Tempus and Ambry business expected to generate $1 billion in revenue and grow at 23%-25% annually [44] Strategic Direction and Industry Competition - Ambry acquisition aligns with Tempus' strategy to offer comprehensive genomic profiling, from hereditary screening to therapy selection and minimal residual disease (MRD) monitoring [15][16] - Tempus aims to be a one-stop shop for oncologists, offering end-to-end solutions, similar to Amazon's approach in e-commerce [15] - The company is focused on leveraging AI in diagnostics and expanding its data business, with tools that make data usable for biotechs and pharmaceutical companies [25][50] Management Commentary on Operating Environment and Future Outlook - Tempus is on track to achieve adjusted EBITDA and cash flow breakeven, with Ambry acquisition accelerating this timeline [7][10] - Data business growth is expected to moderate from 87% YoY, with a focus on sustainable long-term growth in the 25% range [24][50] - Reimbursement for MRD testing remains a key gating factor, with progress expected in the coming years [20] Other Important Information - Tempus added 60 new sales reps in Q3, with productivity expected to improve over the next 6-9 months [30][31] - The company is exploring reimbursement pathways for AI-based diagnostic tools, which could unlock significant future revenue potential [59] Q&A Summary Question: Sustainability of Ambry's 25% growth rate and integration plans [13] - Ambry's growth is stable, with no signs of systemic slowdown, and the business is synergistic with Tempus' existing operations [17][18] - Integration will be gradual, with Ambry operating independently in the near term, but synergies expected in data business and payer relationships [45] Question: Data business growth and TCV trends [21][22] - Data business remains strong, with TCV above $900 million and Q4 historically being the largest quarter for data licensing [26] - Growth rates are expected to moderate, with a focus on sustainable long-term growth [24] Question: Sales force productivity and impact on growth [30][31] - Sales force productivity is improving, with reps expected to reach full efficiency in 6-9 months [31] - The impact on growth is minimal, with fluctuations in test volumes not significantly affecting financial health [33] Question: Ambry's revenue contribution and synergies [36][42] - Majority of Ambry's revenue is external, with minimal overlap with Tempus' existing business [37] - Synergies include leveraging Tempus' data business and Ambry's in-network payer relationships [45] Question: Reimbursement trends and ASP improvements [39][40] - Progress with commercial payers led to incremental ASP improvements, with ADLT status expected to drive further gains in 2025 [40] Question: Data purchasing environment and new customer trends [53] - Data business continues to see strong interest, with large wins like BioNTech, but overall market tailwinds have subsided [54] - Tempus expects a potential rebound in data purchasing as capital becomes more freely available in 2025 or 2026 [55] Question: AI applications and monetization pathways [56] - Collaboration with Northwestern Medicine on ECG-AF algorithm highlights potential for AI applications in healthcare [57] - Reimbursement for algorithmic diagnostics remains a key challenge, with significant revenue potential once payment pathways are established [59] Question: Ambry's impact on health system relationships [61] - Ambry's in-network payer relationships and genetic counselor focus complement Tempus' oncologist-driven business, strengthening overall platform [62][63] Question: Profitability and investment balance post-Ambry acquisition [65] - Tempus is now on an annualized EBITDA and cash flow positive basis, with a focus on sustaining growth rather than maximizing short-term profitability [66][67] Question: Reimbursement trends in psychiatric pharmacogenomics [69] - Tempus' neuropsych business is small, with minimal impact from reimbursement disruptions in the broader market [69] Question: Billing and value proposition of Tempus' CGP test [70] - Tempus follows established reimbursement pathways, with rates set by CMS and local MACs, and expects further ASP improvements with ADLT status [71][72]

TEMPUS 1 Tempus AI, Inc. Investor Presentation NOVEMBER 2024 Disclaimer 2 This presentation contains forward-looking statements that reflect Tempus AI, Inc.'s (the "Company" or "Tempus") current expectations and projections with respect to, among other things, its and Ambry Genetics' (Ambry) financial condition, results of operations, plans, objectives, future performance and business. Forward-looking statements include all statements that are not historical facts. Such forward-looking statements are subjec ...

Earnings Performance - Adjusted loss per share of 25 cents, beating the Zacks Consensus Estimate of 27 cents by 7.4% [1] - GAAP loss per share narrowed to 46 cents from $1.03 in the prior-year quarter [1] Revenue Growth - Total revenues of $180.9 million, beating the Zacks Consensus Estimate by 1.8% and growing 32.9% year-over-year [2] Segmental Performance Geonomics - Sales of $116.4 million, up 20.3% year-over-year, driven by unit growth acceleration of 23.9% annually [3] - Adjusted gross profit of $57.4 million, up 14.2% year-over-year, with adjusted gross margin contracting 260 bps to 49.3% [3] Data and Services - Sales of $64.5 million, up 64.4% year-over-year, driven by Insights (data licensing) growth of 86.6% annually [3] - Adjusted gross profit of $50.5 million, up 112.6% year-over-year, with adjusted gross margin expanding 1780 bps to 78.3% [3] Margins and Expenses - Adjusted gross profit of $107.9 million, up 45.8% year-over-year, with adjusted gross margin expanding 520 bps to 59.6% [4] - Total adjusted operating expenses of $139.3 million, up 17.2% year-over-year [4] - Total loss from operations of $53.6 million, expanding 19.7% year-over-year [4] Financial Position - Cash and cash equivalents and marketable securities of $467.2 million at the end of Q3 2024, down from $490.9 million at the end of Q2 2024 [5] - Cumulative net cash used in operating activities of $149.8 million, down from $174.1 million a year ago [5] 2024 Guidance - Full-year 2024 revenue guidance of approximately $700 million, representing a 32% year-over-year growth, slightly above the Zacks Consensus Estimate of $696.7 million [6] Strategic Developments - Multi-year collaboration with BioNTech to leverage Tempus' TCR dataset for BioNTech's next-generation oncology pipeline [9] - Three-year extension of the strategic agreement with Merck EMD [9] - Agreement to acquire Ambry Genetics for $375 million in cash and $225 million in shares, with $100 million subject to a lock-up agreement [10] Stock Performance - Shares lost 6.1% during after-market trading following Q3 results but gained 23% in the past six months, outperforming the industry's 8.1% rise and the S&P 500's 10.1% increase [8] Industry Comparison - AngioDynamics (ANGO) shares lost 19.2% year-to-date, underperforming the industry's 6.1% growth [12] - Quest Diagnostics (DGX) shares gained 42% year-to-date, outperforming the industry's 14.9% growth [12] - RadNet (RDNT) shares surged 93.7% year-to-date, significantly outperforming the industry's 14.8% growth [13]

Financial Performance - Total revenue for the three months ended September 30, 2024 was $180.9 million, compared to $136.1 million in the same period in 2023, representing a 32.9% increase[165] - Net losses for the three months ended September 30, 2024 were $75.8 million, compared to $53.4 million in the same period in 2023[165] - Adjusted EBITDA for the three months ended September 30, 2024 was $(21.8) million, compared to $(36.2) million in the same period in 2023[165] - Total net revenue increased from $136.1 million to $180.9 million for the three months ended September 30, 2024 compared to the same period in 2023, a 33% increase[202] - Adjusted EBITDA improved to $(96.9) million for the nine months ended September 30, 2024, compared to $(119.1) million in the same period in 2023[234] - The company had an accumulated deficit of $2.1 billion as of September 30, 2024, with cash, cash equivalents, and restricted cash totaling $388.9 million[235][237] - Net cash used in operating activities for the nine months ended September 30, 2024 was $149.8 million, driven by a net loss of $692.8 million[247][248] - Cash used in investing activities for the nine months ended September 30, 2024 was $122.4 million, including a $95.2 million investment in a joint venture[250] - Cash provided by financing activities for the nine months ended September 30, 2024 was $494.5 million, primarily from IPO proceeds and Series G-5 Preferred Stock issuance[252] Revenue Growth and Breakdown - Genomics revenue increased from $96.8 million to $116.4 million for the three months ended September 30, 2024 compared to the same period in 2023, a 20% increase[202] - Data and services revenue increased from $39.2 million to $64.5 million for the three months ended September 30, 2024 compared to the same period in 2023, a 64% increase[202] - Genomics revenue increased by $60.5 million (22%) for the nine months ended September 30, 2024, primarily due to a rise in oncology NGS tests from 159,400 to 198,200[217] - Data and services revenue increased by $48.1 million (42%) for the nine months ended September 30, 2024, driven by $43.4 million from Insights products and new customer adoption[218] - Total net revenue increased by $108.6 million (28%) for the nine months ended September 30, 2024, with Genomics contributing $60.5 million and Data and services contributing $48.1 million[216] Expenses and Costs - Cost of revenues increased by $54.2 million (30%) for the nine months ended September 30, 2024, primarily due to $20.5 million in stock-based compensation and $16.4 million in material and service costs[220] - Technology research and development expenses increased by $65.2 million (92%) for the nine months ended September 30, 2024, driven by $54.4 million in stock-based compensation and $9.4 million in personnel-related costs[222] - Selling, general and administrative expenses increased by $30.0 million (42%) in Q3 2024, primarily due to $12.6 million in stock-based compensation and $7.9 million in personnel-related costs[210] - Research and development expenses increased by $53.4 million (81%) to $119.7 million for the nine months ended September 30, 2024, driven by $44.8 million in stock-based compensation, $2.2 million in validation fees, and $5.3 million in personnel costs[223] - Selling, general, and administrative expenses rose by $432.4 million (204%) to $644.1 million, primarily due to $389.6 million in stock-based compensation and increases in personnel, software, and cloud storage costs[224] - Stock-based compensation expense recognized during the nine months ended September 30, 2024 was $509.4 million[258] Investments and Financing - The company completed its IPO on June 17, 2024, issuing 11,100,000 shares of Class A common stock at $37.00 per share, with net proceeds of $382.0 million[168] - The company entered into a Securities Purchase Agreement to acquire Ambry Genetics Corporation for $375.0 million in cash and 4,843,136 shares of Class A common stock[166] - The company secured a $100 million senior secured revolving credit facility and $200.0 million in additional term loans to fund the Ambry Genetics acquisition[167] - Net proceeds from the IPO in June 2024 were $382.0 million, and the company raised $200.0 million in a private placement in April 2024[237] - Term Loan Facility increased to $260 million after two amendments, with interest rates adjusted by 25 basis points and 7.25% for Term SOFR borrowings[241] - Convertible Promissory Note with Google reduced to $250 million, with principal reductions based on Google Cloud Platform usage[243][244] Partnerships and Commitments - AstraZeneca committed to spend a minimum of $220 million on the company's products and services through December 31, 2028, with potential to increase to $320 million[174] - GlaxoSmithKline committed to spend a minimum of $180 million on the company's products and services through December 31, 2027, with potential for an additional $120 million[176] - Recursion Pharmaceuticals agreed to pay up to $160 million in license fees over five years for access to the company's proprietary database and services[177] Product and Service Offerings - The company's Genomics product line leverages next-generation sequencing and other molecular pathology testing to generate structured, de-identified data for commercialization[164] - The company's offerings have been used by more than 7,000 physicians and over 200 biotech companies, including 19 of the 20 largest public pharmaceutical companies based on 2023 revenue[182] - The number of oncology NGS tests increased from approximately 55,700 tests for the three months ended September 30, 2023 to approximately 69,000 tests for the three months ended September 30, 2024[203] - Data and services revenue increased by $23.3 million in Q3 2024, driven by higher demand for Insights products and growth from existing and new customers[204] Interest and Other Financial Metrics - Interest income increased by $3.3 million (223%) in Q3 2024, driven by higher cash on hand[211] - Interest expense increased by $1.4 million (11%) in Q3 2024, primarily due to compounding interest on the Amended Note[212] - Other (expense) income, net decreased by $13.8 million (-604%) in Q3 2024, driven by a $45.6 million increase in expense related to the change in fair value of warrant liability[213] - Interest income increased by $1.7 million (29%) to $7.5 million, driven by higher cash on hand as of September 30, 2024[225] - Interest expense rose by $7.0 million (21%) to $40.3 million, primarily due to compounding interest on debt and additional borrowings[225] - Other (expense) income, net, decreased by $25.7 million (-325%) to $(17.8) million, driven by a $50.4 million increase in warrant liability fair value expense[226] - Losses from equity method investments increased by $1.4 million (462%) to $1.7 million, due to losses from a joint venture entered into in July 2024[228] Reimbursement and Testing Metrics - As of December 31, 2023, the company had received payment on approximately 50% of its clinical oncology NGS tests across all payers performed from January 1, 2021 through December 31, 2022[184] - The company's average reimbursement for NGS tests in oncology was approximately $916 and $1,452 for the years ended December 31, 2022 and 2023, respectively[184] Risk Factors - Company is exposed to interest rate risk and foreign currency risk, with no material impact from a hypothetical 10% change in foreign currency exchange rates[262][264] - Inflation risk could impact future operating results, though no material impact has been observed to date[265] - Majority of revenue generated in the United States, with insignificant foreign currency-denominated revenue as of September 30, 2024[264] - Hypothetical 10% change in foreign currency exchange rates would not materially impact financial condition or results of operations as of September 30, 2024[264] - No hedging arrangements in place for foreign currency risk as of September 30, 2024[264] - Company exposed to inflation risk, including increases in raw material and overhead costs[265] - Inflation has not materially impacted financial position or results of operations to date[265] - High future inflation rates may adversely affect gross margin and operating expenses as a percentage of revenue[265] Future Outlook and Requirements - The company anticipates increased capital expenditure requirements due to higher demand for its tests and potential expansion of laboratory capacity[236] - Company required to generate consolidated revenues of $459.1 million and $594.1 million for the years ending December 31, 2024 and 2025, respectively[242]

Revenue Growth - Revenue increased 33.0% year-over-year to $180.9 million in Q3 2024[2] - Data and services revenue grew 64.4% year-over-year, reaching $64.5 million[4] - Genomics revenue was $116.4 million, an increase of 20.3% year-over-year, with unit growth of 23.9%[4] - Total net revenue for Q3 2024 was $180,929,000, representing a 33% increase from $136,057,000 in Q3 2023[20] - Genomics revenue increased to $116,422,000 in Q3 2024, up 20% from $96,815,000 in Q3 2023[20] - Data and services revenue rose to $64,507,000 in Q3 2024, a 64% increase compared to $39,242,000 in Q3 2023[20] - Genomics revenue for the nine months ended September 30, 2024, increased to $331,315 thousand, up from $270,797 thousand in the same period of 2023, representing a growth of approximately 22.3%[30] - Data and services revenue for the nine months ended September 30, 2024, reached $161,403 thousand, compared to $113,301 thousand in the same period of 2023, reflecting a growth of approximately 42.5%[31] Financial Performance - Net loss for Q3 2024 was $(75.8) million, including $22.2 million of stock compensation expense[4] - Adjusted EBITDA improved to $(21.8) million, a $14.4 million year-over-year improvement[2] - The company reported a comprehensive loss of $65,538,000 for Q3 2024, compared to a comprehensive loss of $53,480,000 in Q3 2023[20] - Net loss for the nine months ended September 30, 2024, was $692,795 thousand, compared to a net loss of $163,635 thousand for the same period in 2023[25] - The net loss for the three months ended September 30, 2024, was $(75,840) million, compared to $(53,426) million in the same period of 2023[35] - Non-GAAP net loss per share for the nine months ended September 30, 2024, was $(1.53), compared to $(1.53) in the same period of 2023[35] Expenses - Total operating expenses for Q3 2024 were $234,545,000, up 30% from $180,846,000 in Q3 2023[20] - Operating expenses for the three months ended September 30, 2024, totaled $159,455 million, a 34% increase from $118,816 million in the same period of 2023[34] - Non-GAAP operating expenses for the nine months ended September 30, 2024, were $404,996 million, compared to $348,415 million for the same period in 2023, indicating a 16% increase[34] - Technology research and development expenses for the three months ended September 30, 2024, were $30,680 million, up from $24,156 million in the same period of 2023, reflecting a 27% increase[34] - Selling, general and administrative expenses for the three months ended September 30, 2024, were $101,427 million, compared to $71,426 million in the same period of 2023, a 42% increase[34] Cash and Assets - Cash and cash equivalents increased to $388,006,000 as of September 30, 2024, from $165,767,000 at December 31, 2023[21] - Total current assets reached $679,412,000 as of September 30, 2024, up from $350,331,000 at December 31, 2023[21] - Total cash, cash equivalents, and restricted cash at the end of the period was $388,878 thousand, up from $133,528 thousand at the end of the same period in 2023[27] Liabilities and Equity - Total liabilities increased to $918,000,000 as of September 30, 2024, compared to $840,672,000 at December 31, 2023[22] - Stockholders' equity improved to $53,728,000 as of September 30, 2024, from a deficit of $1,382,163,000 at December 31, 2023[24] Future Outlook - Full year 2024 revenue is expected to be approximately $700 million, representing ~32% annual growth[10] - Ambry Genetics is expected to generate over $300 million in revenue and over $40 million in EBITDA in 2024[7] - Tempus announced an agreement to acquire Ambry Genetics for $375 million in cash and $225 million in shares[7] - Tempus initiated a collaboration with BioNTech to support its next-generation oncology pipeline[6]