GeneDx (WGS) Q1 2025 Earnings Call April 30, 2025 08:30 AM ET Company Participants Sabrina Dunbar - Director of IR & CommunicationsKatherine Stueland - President & CEOKevin Feeley - Chief Financial OfficerTycho Peterson - Managing DirectorBrandon Couillard - Managing Director Conference Call Participants Bill Bonello - Senior Research AnalystDan Brennan - AnalystMark Massaro - Managing Director - Senior Equity Research AnalystMatthew Sykes - Analyst Operator Good day and thank you for standing by. Welcome t ...

GeneDx (WGS) Q1 2025 Earnings Call April 30, 2025 08:30 AM ET Speaker0 Good day and thank you for standing by. Welcome to the GeneDx First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message Please be advised that today's conference is being recorded. ...

GeneDx (Nasdaq: WGS) 1Q 2025 Earnings Presentation April 30, 2025 Forward Looking Statements This presentation contains certain forward-looking statements within the meaning of the federal securities laws, including statements regarding our future performance and our market opportunity, including our expected full year 2025 reported revenue and volume guidance, adjusted gross margin and our adjusted net income in 2025. These forward-looking statements generally are identified by the words "believe," "projec ...

Financial Performance - Total revenue for Q1 2025 was $87.115 million, a 39.7% increase from $62.422 million in Q1 2024[15] - Diagnostic test revenue reached $85.759 million, up 40.4% from $61.104 million year-over-year[15] - Gross profit for Q1 2025 was $58.476 million, compared to $37.411 million in Q1 2024, reflecting a gross margin improvement[15] - The net loss for Q1 2025 was $6.529 million, significantly reduced from a net loss of $20.239 million in Q1 2024[15] - Revenue from patients with third-party insurance was $68.059 million for the three months ended March 31, 2025, up from $43.839 million in the same period of 2024, reflecting a growth of about 55.2%[39] - Revenue for the GeneDx segment was $87.1 million for the three months ended March 31, 2025, an increase from $62.4 million in the same period of 2024, reflecting a growth of approximately 39.6%[109] - For the three months ended March 31, 2025, the net loss attributable to common stockholders was $6.5 million, compared to a net loss of $20.2 million for the same period in 2024, resulting in a basic and diluted loss per share of $0.23, down from $0.78[104] Assets and Liabilities - Cash and cash equivalents increased to $99.704 million as of March 31, 2025, up from $85.212 million at the end of 2024[14] - Total assets grew to $446.430 million, an increase from $419.380 million at the end of 2024[14] - The company recorded a total financial liability of $4.619 million as of March 31, 2025, compared to $3.519 million as of December 31, 2024, indicating an increase of approximately 31.4%[47] - The Company reported total liabilities of $41.9 million as of March 31, 2025, compared to $30.0 million as of December 31, 2024, reflecting an increase of approximately 39.6%[106] Operational Performance - The company reported a loss from operations of $4.551 million for Q1 2025, an improvement from a loss of $13.660 million in Q1 2024[15] - Research and development expenses were $12.577 million, compared to $11.567 million in the same period last year[15] - The company has established liabilities of $14.0 million and $12.6 million for potential recoupments of payments as of March 31, 2025, and December 31, 2024, respectively[46] Strategic Initiatives - The company plans to pursue a new strategic direction and expects to scale to profitability[12] - GeneDx is in the process of acquiring Fabric Genomics, which is expected to enhance its service offerings[12] - The Company entered into a merger agreement to acquire Fabric Genomics for approximately $33.0 million in cash, with potential milestone payments totaling up to $18.0 million based on revenue performance[112] Stock and Compensation - Stock-based compensation expense for the three months ended March 31, 2025, totaled $3,983 million, compared to a reversal of $451 million in the same period of 2024[86] - The Company granted 460,439 restricted stock units during the three months ended March 31, 2025, with a weighted-average grant-date fair value of $94.22[95] - Unrecognized stock-based compensation expense related to the Company's restricted stock units was $48.0 million as of March 31, 2025[97] Debt and Financing - The Company entered into the Perceptive Term Loan Facility on October 27, 2023, with an initial tranche of $50 million funded and an additional tranche of $25 million available until December 31, 2024[68] - The Perceptive Term Loan Facility has a maturity date of October 27, 2028, with an interest rate of Term SOFR plus an applicable margin of 7.5%[70] - The Company made principal payments totaling $0.3 million during the three months ended March 31, 2025, with an outstanding loan balance of $5.5 million from the DECD Loan Agreement[77] Tax and Regulatory Matters - The effective tax rate for the three months ended March 31, 2025, was (1.2)%, compared to 0.4% for the same period in 2024, primarily due to changes in valuation allowances related to deferred tax assets[102] - The company plans to adopt ASU 2023-09 regarding income tax disclosures in its Annual Report for the year ended December 31, 2025, without expecting a material impact on its consolidated financial statements[36] - The company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements, which requires additional disclosures about specific expense categories[38]

Revenue Growth - First quarter 2025 revenues reached $87.1 million, reflecting a 42% year-over-year increase[5] - Exome and genome test revenue grew to $71.4 million, marking a 62% year-over-year growth[5] - Total revenue for the three months ended March 31, 2025, reached $87,115,000, compared to $62,422,000 in the prior year, marking a year-over-year increase of 39.6%[26] - Diagnostic test revenue for the three months ended March 31, 2025, was $85,759,000, an increase from $61,104,000 in the same period of 2024, representing a growth of 40.3%[26] Profitability and Loss - Adjusted net income for the first quarter 2025 was $7.7 million, compared to an adjusted net loss of $8.0 million in the same quarter of 2024[6] - The net loss for the three months ended March 31, 2025, was $6,529,000, a significant reduction from a net loss of $20,239,000 in the prior year, indicating a decrease in losses by 67.7%[26] - The company reported a loss from operations of $4,551,000 for the three months ended March 31, 2025, a significant improvement from a loss of $13,660,000 in the same period of 2024[26] Margin Improvement - Adjusted gross margin improved to 69% in Q1 2025, up from 61% in Q1 2024[5] - The gross margin improved to 67.1% for the three months ended March 31, 2025, compared to 59.9% in the same period of 2024[26] Expenses - Research and development expenses for the three months ended March 31, 2025, were $12,577,000, compared to $11,567,000 in 2024, representing an increase of 8.7%[26] - Selling and marketing expenses increased to $18,316,000 for the three months ended March 31, 2025, from $16,085,000 in the same period of 2024, a rise of 13.8%[26] - General and administrative expenses rose to $32,134,000 for the three months ended March 31, 2025, compared to $23,419,000 in 2024, reflecting an increase of 37.1%[26] Cash Position - Cash position as of March 31, 2025, was $160.2 million, including $4.1 million generated from ordinary operations[10] - Cash and cash equivalents increased to $99,704,000 as of March 31, 2025, up from $85,212,000 at the end of December 2024, indicating a growth of 17.0%[24] - Cash, cash equivalents, and restricted cash at the end of the period totaled $100.694 million, up from $84.660 million at the end of March 2024[28] Strategic Initiatives - GeneDx plans to acquire Fabric Genomics, expected to contribute $3 to $5 million in post-close revenue[10] - GeneDx launched ultraRapid Whole Genome Sequencing, providing genomic insights in as soon as 48 hours for neonatal and pediatric patients[10] - The company expanded its commercial footprint with new indications for cerebral palsy and Inborn Errors of Immunity, enhancing access to genomic testing[10] Investment and Financing - The company invested $6.129 million in property and equipment, compared to $443,000 in the same period last year[28] - Proceeds from offerings, net of issuance costs, amounted to $13.894 million, with no such proceeds reported in the same quarter of 2024[28] - Cash paid for interest decreased to $1.600 million from $2.019 million year-over-year[28] Cash Flow - Net cash provided by operating activities was $10.182 million, compared to a net cash used of $16.413 million in the prior year[28] - The company had a net cash used in investing activities of $9.408 million, contrasting with a net cash provided of $843,000 in the prior year[28] - The change in accounts receivable was a negative $8.557 million, indicating a decrease in cash flow from sales[28]

Core Viewpoint - GeneDx Holdings Corp. has received a Zacks Rank 2 (Buy) upgrade due to an upward trend in earnings estimates, indicating a positive outlook for the company's stock price [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in a company's earnings picture, which is a significant factor influencing stock prices [2][4]. - A strong correlation exists between earnings estimate revisions and near-term stock movements, making the Zacks rating system valuable for investors [6]. Company Performance Indicators - For GeneDx Holdings, the rising earnings estimates and the rating upgrade suggest an improvement in the company's underlying business, likely leading to increased stock prices [5][10]. - The Zacks Consensus Estimate for GeneDx Holdings indicates expected earnings of $0.97 per share for the fiscal year ending December 2025, reflecting a year-over-year increase of 288% [8]. Zacks Rating System Overview - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a proven track record of performance, particularly for Zacks Rank 1 stocks, which have averaged a +25% annual return since 1988 [7][9]. - Only the top 20% of Zacks-covered stocks receive a 'Strong Buy' or 'Buy' rating, indicating superior earnings estimate revisions and potential for market-beating returns [10].

Core Viewpoint - The article discusses the investment landscape for certain stocks, particularly in the biotech and small-cap sectors, highlighting the potential for both gains and losses due to their inherent volatility [2][3]. Group 1: Investment Insights - Some stocks mentioned may already be part of various model portfolios, indicating a strategic approach to investment in these sectors [2]. - Biotech and small-cap stocks are noted to carry a higher risk of losses compared to the broader market, emphasizing the need for careful consideration before investing [2]. - The article suggests that opinions on these stocks can change over time with new data, which may affect their future favorability in the market [2]. Group 2: Performance and Recommendations - Past performance of stocks is not guaranteed to predict future results, underscoring the unpredictable nature of the market [3]. - The article does not provide specific recommendations or advice on whether any investment is suitable for particular investors, maintaining a neutral stance [3]. - It is highlighted that the views expressed may not reflect the overall stance of the platform, indicating a diversity of opinions among analysts [3].

Core Viewpoint - GeneDx Holdings Corp. is expected to report strong first-quarter 2025 results, with significant revenue and earnings growth anticipated compared to the previous year [1][2]. Group 1: Earnings and Revenue Estimates - The Zacks Consensus Estimate for GeneDx's first-quarter 2025 revenues is $79.9 million, indicating a 28% increase from the same quarter last year [2]. - The expected earnings per share (EPS) for the first quarter of 2025 is 11 cents, reflecting a 133% improvement compared to the previous year [2]. - GeneDx reported adjusted earnings of 70 cents per share in the last quarter, exceeding the Zacks Consensus Estimate by 250% [1]. Group 2: Performance Trends - GeneDx has consistently surpassed earnings estimates in the past four quarters, with an average surprise of 120.05% [1]. - Estimates for the first-quarter earnings have remained stable at 11 cents over the past 90 days [3]. Group 3: Growth Drivers - Revenue growth is expected to be driven by Exome and genome tests, with over 20,000 tests delivered in the fourth quarter, marking a 32% year-over-year increase and a 101% revenue jump [4]. - The introduction of cerebral palsy as a new indication for genetic testing may have positively impacted performance [4]. - The outpatient pediatric neurology sector is likely contributing to strong growth, supported by the launch of Aura, Epic's specialty diagnostics suite [5]. Group 4: Innovations and Operational Efficiency - GeneDx has introduced ultraRapid Whole Genome Sequencing, providing faster diagnoses for neonatal and pediatric patients [6]. - The company achieved a 106% growth in adjusted gross profit from continuing operations in the fourth quarter, leading to a 56% increase in gross margin [7]. - Ongoing improvements in operational efficiency are expected to enhance bottom-line performance in the upcoming quarter [7].

Group 1 - Michael Wiggins De Oliveira is an inflection investor, focusing on buying undervalued companies at pivotal moments when their profitability is expected to increase significantly over the next year [1] - The investment strategy emphasizes technology and the Great Energy Transition, including uranium, with a concentrated portfolio of approximately 15 to 20 stocks and an average holding period of 18 months [1] Group 2 - Michael has over 10 years of experience analyzing companies in the tech and energy sectors, and has built a following of over 40,000 on Seeking Alpha [2] - He leads the investing group Deep Value Returns, which offers insights through a concentrated portfolio of value stocks, timely updates, weekly webinars for live advice, and support for both new and experienced investors [2] - The Deep Value Returns community is described as active, vibrant, and supportive, with easy access via chat [2]

Core Viewpoint - Pomerantz LLP is investigating claims of potential securities fraud and unlawful business practices by GeneDx Holdings Corp and its executives [1][2] Group 1: Allegations Against GeneDx - Grizzly Research published a report alleging that GeneDx's growth is largely an illusion, driven by fraudulent schemes aimed at exploiting Medicaid and Medicare systems to inflate revenue [2] - The report claims that GeneDx has engaged in "code stacking," allowing the company to bill insurance providers for services that do not meet required criteria [2] - Testimonies from former employees and ongoing litigation suggest that GeneDx's executives, including CEO Katherine Stueland and CFO Kevin Feeley, have sold shares immediately upon vesting, indicating potential insider knowledge of imminent risks [2] Group 2: Market Reaction - Following the release of the Grizzly report, GeneDx's stock price fell by $4.84 per share, or 6.72%, closing at $67.18 per share on February 5, 2025 [2]