GeneDx (US:WGS)2024-07-30 20:19Part I. Financial Information This section presents unaudited financial statements, management's analysis, market risk, and internal controls Item 1. Condensed Consolidated Financial Statements (Unaudited) These unaudited statements detail the company's financial position, operations, equity, and cash flows for Q2 2024 Condensed Consolidated Balance Sheets Total assets decreased to $389.1 million by June 30, 2024, due to reduced cash, with liabilities up and equity down Condensed Consolidated Balance Sheets (in thousands) | Account | June 30, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $56,076 | $99,681 | | Total current assets | $162,167 | $182,339 | | Total assets | $389,100 | $418,756 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $68,270 | $58,818 | | Total liabilities | $195,057 | $190,739 | | Total stockholders' equity | $194,043 | $228,017 | | Total liabilities and stockholders' equity | $389,100 | $418,756 | Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) Q2 2024 revenue grew 45% to $70.5 million, gross profit surged 129%, and net loss significantly narrowed Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $70,514 | $48,706 | $132,936 | $91,845 | | Gross Profit | $42,952 | $18,757 | $80,363 | $33,993 | | Loss from Operations | ($10,579) | ($51,622) | ($24,239) | ($111,986) | | Net Loss | ($29,173) | ($46,719) | ($49,412) | ($107,708) | | Basic and Diluted Net Loss per Share | ($1.10) | ($1.84) | ($1.88) | ($4.73) | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Stockholders' equity decreased to $194.0 million by June 30, 2024, mainly due to the $49.4 million net loss - Stockholders' equity declined to $194.0 million at June 30, 2024, from $228.0 million at the end of 2023, mainly due to the net loss of $49.4 million incurred during the first six months of 202415 - During the six months ended June 30, 2024, the company issued 645,414 shares of Class A common stock upon the cashless exercise of the Perceptive warrant, contributing $12.6 million to additional paid-in capital15 Condensed Consolidated Statements of Cash Flows (Unaudited) Net cash used in operations significantly reduced to $20.9 million, with total cash and equivalents decreasing Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($20,918) | ($109,061) | | Net cash used in investing activities | ($21,858) | ($11,733) | | Net cash (used in) provided by financing activities | ($829) | $140,046 | | Net (decrease) increase in cash | ($43,605) | $19,252 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's genomics business, accounting policies, revenue, fair value, debt, legal, and segment reporting - The company is a leading genomics company focused on pediatric and rare diseases, delivering health insights to inform diagnosis and treatment, serving healthcare professionals and billing third-party payors across the U.S.42 Disaggregated Revenue by Segment (Six Months Ended June 30, in thousands) | Segment | 2024 | 2023 | | :--- | :--- | :--- | | GeneDx | $130,385 | $85,919 | | Legacy Sema4 | $2,551 | $5,926 | | Total | $132,936 | $91,845 | - The company reached an agreement in principle to settle a shareholder class action lawsuit for approximately $21 million, with about $10 million expected to be covered by insurance178 - The company has a senior secured term loan facility with Perceptive Credit Holdings for up to $75.0 million, with an initial $50.0 million tranche funded in October 202363331 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses improved financial performance from GeneDx focus, increased revenue, reduced expenses, and sufficient liquidity Results of Operations Q2 2024 revenue grew 45% to $70.5 million, gross profit increased 129%, and operating expenses significantly decreased Q2 2024 vs Q2 2023 Performance (in thousands) | Metric | Q2 2024 | Q2 2023 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $70,514 | $48,706 | $21,808 | 45% | | Gross Profit | $42,952 | $18,757 | $24,195 | 129% | | R&D Expense | $10,902 | $17,138 | ($6,236) | (36)% | | G&A Expense | $25,170 | $37,341 | ($12,171) | (33)% | | Loss from Operations | ($10,579) | ($51,622) | $41,043 | (80)% | - The increase in diagnostic test revenue for Q2 2024 was primarily driven by a $22.0 million (77%) increase in whole exome and genome sequencing revenues, resulting from a 52% increase in test volumes and higher average reimbursement rates207 Non-GAAP Financial Measures Non-GAAP measures, including Adjusted Gross Profit and Net Loss, offer a clearer view of operating performance by excluding certain items Reconciliation of Net Loss to Adjusted Net Loss (in thousands) | | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net loss | ($29,173) | ($46,719) | | Adjustments (Depreciation, Stock Comp, etc.) | $26,433 | $5,872 | | Adjusted net loss | ($2,740) | ($41,847) | Reconciliation of Gross Profit to Adjusted Gross Profit (in thousands) | | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Gross profit | $42,952 | $18,757 | | Adjustments (Depreciation, Stock Comp, etc.) | $894 | $1,497 | | Adjusted gross profit | $43,846 | $20,254 | Liquidity and Capital Resources The company maintains $106.9 million in cash and marketable securities, providing sufficient liquidity for at least the next twelve months - Management believes that existing cash, cash equivalents, and marketable securities of $106.9 million provide sufficient liquidity for at least twelve months from the filing date248249 - The company established an at-the-market (ATM) offering to sell up to $75.0 million in Class A common stock, with no shares sold as of June 30, 2024247 - Net cash used in operating activities for the first six months of 2024 was reduced to $20.9 million from $109.1 million in the prior-year period, reflecting improved profitability and cost savings281251 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure is to interest rates, affecting its cash and variable rate debt, with no material impact from rate changes - The company is exposed to interest rate risk on its cash and marketable securities portfolio ($107.8 million at June 30, 2024) and its variable rate debt from the Perceptive term loan facility287259 Item 4. Controls and Procedures Management concluded disclosure controls were ineffective due to an ITGC material weakness, though financial statements are fairly stated - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2024288 - The ineffectiveness is due to a material weakness in ITGCs related to system access and change management, which has not yet been fully remediated290291 - Notwithstanding the material weakness, management concluded that the condensed consolidated financial statements are fairly stated in all material respects in accordance with U.S. GAAP289 Part II. Other Information This section covers legal proceedings, updated risk factors, equity sales, other disclosures, and exhibits Item 1. Legal Proceedings This section refers to Note 9 for legal proceedings, including a shareholder class action lawsuit settlement for $21 million - Information on legal proceedings is detailed in Note 9 of the financial statements314 - The company has reached an agreement in principle to settle a shareholder class action lawsuit for ~$21 million, which is expected to be partially funded by ~$10 million from insurance178 Item 1A. Risk Factors The company highlights increased compliance costs from losing 'smaller reporting company' status and risks from new FDA regulations on LDTs - The company will no longer qualify as a 'smaller reporting company' starting with its Q1 2025 report, leading to increased compliance costs293316 - A new FDA final rule, effective May 2025, will phase out enforcement discretion for LDTs over four years, which could subject the company's tests to more significant regulatory requirements and costs317318 - A lawsuit has been filed by the American Clinical Laboratory Association challenging the FDA's authority to regulate LDTs, the outcome of which is uncertain296 Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities No unregistered equity sales, use of proceeds, or issuer purchases of equity securities were reported for the period - None reported for the period298 Item 5. Other Information The company provided a supplemental disclosure updating information on the 'Information Blocking Prohibition' - A final rule establishing disincentives for healthcare providers violating 'information blocking' regulations became effective July 31, 2024322 Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including CEO/CFO certifications and XBRL data - The report includes required CEO/CFO certifications and XBRL financial data files as exhibits323