Tempus Ai,Inc.(TEM) - 2025 Q2 - Quarterly Report

Part I – Financial Information Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Tempus AI, Inc. as of June 30, 2025, show significant revenue growth and a narrowed net loss compared to the prior year. The balance sheet expanded considerably due to the Ambry Genetics acquisition, which increased assets, liabilities, and goodwill. Cash flow from operations remained negative, while financing activities were driven by new debt to fund the acquisition, and investing activities reflected the cash used for this purchase Condensed Consolidated Balance Sheets As of June 30, 2025, the company's total assets increased to $1.63 billion from $926.1 million at year-end 2024, primarily driven by a significant rise in goodwill and intangible assets from the Ambry acquisition. Total liabilities also grew to $1.32 billion from $869.8 million, largely due to increased long-term debt and a new revolving credit facility used to finance the acquisition. Consequently, total stockholders' equity increased to $309.6 million from $56.3 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $186,310 | $340,954 | | Total current assets | $644,201 | $667,603 | | Goodwill | $325,793 | $73,343 | | Intangible assets, net | $387,564 | $11,716 | | Total Assets | $1,625,365 | $926,116 | | Total current liabilities | $418,160 | $291,070 | | Long-term debt, net | $471,663 | $267,244 | | Revolving credit facility | $100,000 | $— | | Total Liabilities | $1,315,803 | $869,777 | | Total Stockholders' equity | $309,562 | $56,339 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the second quarter of 2025, Tempus AI reported a 90% year-over-year increase in total net revenue to $314.6 million. The net loss significantly narrowed to $42.8 million from $552.2 million in Q2 2024, primarily because the prior-year period included a substantial one-time stock-based compensation expense related to the IPO. For the six-month period, revenue grew 83% to $570.4 million, and the net loss was reduced to $110.9 million from $617.0 million Q2 Financial Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Net Revenue | $314,635 | $165,969 | 90% | | - Genomics | $241,843 | $112,324 | 115% | | - Data and services | $72,792 | $53,645 | 36% | | Loss from Operations | $(61,774) | $(533,492) | 88% | | Net Loss | $(42,843) | $(552,212) | 92% | | Net Loss Per Share | $(0.25) | $(6.86) | 96% | H1 Financial Performance (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Net Revenue | $570,372 | $311,789 | 83% | | - Genomics | $435,647 | $214,893 | 103% | | - Data and services | $134,725 | $96,896 | 39% | | Loss from Operations | $(130,463) | $(586,766) | 78% | | Net Loss | $(110,880) | $(616,955) | 82% | | Net Loss Per Share | $(0.64) | $(9.02) | 93% | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $61.5 million, a significant improvement from the $198.5 million used in the same period of 2024. Net cash used in investing activities was $385.3 million, primarily for business acquisitions, a sharp contrast to the $9.0 million provided by investing activities in the prior year. Net cash provided by financing activities was $293.0 million, sourced from new debt facilities, compared to $502.6 million in 2024 which was driven by the IPO Six Months Ended June 30, Cash Flow Summary (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(61,460) | $(198,458) | | Net cash (used in) provided by investing activities | $(385,329) | $8,982 | | Net cash provided by financing activities | $293,042 | $502,631 | | Net (decrease) increase in Cash | $(153,784) | $313,065 | - The primary use of cash in investing activities for H1 2025 was $380.8 million for business combinations, net of cash acquired[17] - Financing activities in H1 2025 were driven by proceeds from a new revolving credit facility ($98.0 million) and long-term debt ($196.0 million) to fund acquisitions[20] Notes to Condensed Consolidated Financial Statements The notes detail significant accounting policies and events during the period. Key highlights include the revenue breakdown showing strong growth in both Genomics and Data services, the major acquisition of Ambry Genetics for approximately $695 million, the establishment of a joint venture in Japan with SoftBank, and details on the company's substantial debt facilities. The notes also cover subsequent events, including a $750 million convertible note offering and an agreement to sell up to $500 million in stock through an ATM facility - The company operates as a single operating and reportable segment, with the CEO acting as the chief operating decision maker (CODM)[30] - The company expects to become a 'large accelerated filer' and no longer qualify as an 'emerging growth company' as of December 31, 2025[42] - On February 3, 2025, the company completed its acquisition of Ambry Genetics for consideration of $375.0 million in cash and 4.84 million shares of Class A common stock. Ambry contributed $97.3 million in revenue for Q2 2025[67][68][76] - In May 2024, the company formed a 50/50 joint venture, SB Tempus, with SoftBank in Japan, with each party contributing ¥15 billion ($95.2 million)[93] - Subsequent to the quarter end, in July 2025, the company completed a $750.0 million convertible senior notes offering and entered into an 'At the Market' (ATM) sales agreement to offer and sell up to $500.0 million of Class A common stock[168][177] - The company reincorporated from a Delaware corporation to a Nevada corporation, effective August 7, 2025[29][341] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 90% YoY revenue growth in Q2 2025 to increased test volumes in Genomics, driven by both organic growth and the Ambry acquisition, and higher demand for data products. The significant reduction in net loss was primarily due to a large, one-time stock-based compensation expense in Q2 2024 post-IPO. The company's liquidity was bolstered by new debt to fund the Ambry acquisition and a subsequent $750 million convertible note offering in July 2025, which management believes provides sufficient capital for over twelve months Overview Tempus positions itself as a technology company applying AI to healthcare to create 'Intelligent Diagnostics'. Its platform integrates data to support physicians and researchers across three product lines: Genomics, Data, and AI Applications. Recent strategic developments include the acquisition of Ambry Genetics to expand hereditary testing capabilities and major multi-year data and service collaborations with pharmaceutical companies like AstraZeneca, GSK, and Recursion - The company's core strategy is to create 'Intelligent Diagnostics' by applying AI to make laboratory tests more accurate and personal, leveraging its platform that integrates clinical, molecular, and imaging data[187] - The acquisition of Ambry Genetics expands the company's testing capabilities into new disease categories such as pediatrics, rare disease, immunology, and cardiology[69][193] - The company has established several multi-year strategic collaborations, including a $220 million commitment from AstraZeneca, a $180 million commitment from GSK, and a $160 million agreement with Recursion[198][199][200] Results of Operations In Q2 2025, total revenue increased 90% YoY to $314.6 million. Genomics revenue grew 115%, driven by a 26% increase in Oncology test volume and the addition of $97.3 million from the newly acquired Ambry. Data and services revenue rose 36% due to higher demand for Insights products. Total operating expenses decreased 61% to $376.4 million, primarily because Q2 2024 included $488.3 million in stock-based compensation from IPO-related RSU vesting. Excluding this, underlying operating costs increased due to the Ambry acquisition and business growth Revenue Comparison - Q2 2025 vs Q2 2024 (in thousands) | Revenue Line | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Genomics | $241,843 | $112,324 | $129,519 | 115% | | Data and services | $72,792 | $53,645 | $19,147 | 36% | | Total Net Revenue | $314,635 | $165,969 | $148,666 | 90% | - The increase in Genomics revenue was driven by a rise in Oncology test volume from ~66,500 to ~84,000 and the addition of ~128,000 Hereditary tests from the Ambry acquisition, which contributed $97.3 million[228][229][230] - The decrease in operating expenses was primarily due to a $465.7 million YoY reduction in stock-based compensation expense. Q2 2024 included a large expense related to RSU vesting upon the company's IPO[232][235][237][238] - Other income (net) was $41.7 million in Q2 2025, compared to an expense of $(7.0) million in Q2 2024, primarily driven by a $41.5 million increase in income from unrealized gains on marketable equity securities[241] Non-GAAP Financial Measure The company uses Adjusted EBITDA as a non-GAAP measure to assess operating performance. For Q2 2025, the Adjusted EBITDA loss was $5.6 million, a significant improvement from the $31.2 million loss in Q2 2024. For the first six months of 2025, the Adjusted EBITDA loss was $21.8 million, compared to a $75.1 million loss in the prior-year period. The improvement reflects revenue growth and operating leverage Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net loss | $(42,843) | $(552,212) | $(110,880) | $(616,955) | | Adjustments... | ... | ... | ... | ... | | Adjusted EBITDA | $(5,580) | $(31,186) | $(21,754) | $(75,112) | Liquidity and Capital Resources As of June 30, 2025, Tempus had $188.1 million in cash, cash equivalents, and restricted cash. The company has a history of operating losses but has funded operations through equity and debt financing. Subsequent to the quarter, the company raised approximately $725.9 million in net proceeds from a convertible senior notes offering in July 2025. Management believes current cash, securities, and anticipated cash flows are sufficient to fund operations for more than twelve months - The company had an accumulated deficit of $2.3 billion as of June 30, 2025[267] - In July 2025, the company completed a private offering of $750.0 million in 0.75% Convertible Senior Notes due 2030, with net proceeds of approximately $725.9 million[191][269] - A portion of the note proceeds was used to repay $293.5 million of existing term loans and to pay $41.8 million for capped call transactions to reduce potential dilution[192][278][279] - The company believes its current cash, marketable securities, and anticipated cash flows will be sufficient to meet requirements for more than twelve months from the report's filing date[269] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposures relate to interest rates, foreign currency, and inflation. Interest rate risk stems from its variable-rate debt facilities. Foreign currency risk is currently insignificant but is expected to grow with international expansion. Inflation risk could adversely affect margins and operating costs, though its impact to date has not been material - The company is exposed to interest rate risk on its $579.6 million outstanding debt under its Term Loan and Revolving Credit Facilities[307] - Foreign currency risk is currently not material as the majority of revenue is generated in the U.S., but this may change with international growth[308] - Inflation is a potential risk that could impair operating results by increasing raw material and overhead costs[310] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of June 30, 2025. There were no material changes to the company's internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of June 30, 2025[311] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[312] Part II – Other Information Legal Proceedings The company is involved in several legal matters, including ongoing patent infringement litigation with Guardant Health Inc. filed in June 2024. Additionally, a federal securities class-action lawsuit was filed against the company and its officers in June 2025. The company has also received and responded to government inquiries, including a Civil Investigative Demand from the U.S. Attorney's Office for the Eastern District of New York related to compliance with healthcare laws - The company is engaged in patent litigation with Guardant Health Inc., with complaints and counterclaims filed by both parties regarding alleged infringement and false advertising[320] - A federal securities class-action lawsuit was filed in June 2025, alleging false or misleading statements between August 2024 and May 2025. The company believes the complaint is without merit[321] - The company received a Civil Investigative Demand (CID) from the U.S. Attorney's Office in March 2024 related to compliance with the False Claims Act and Anti-Kickback statute, and has been producing documents in response[318] Risk Factors The company highlights new risks associated with its July 2025 issuance of $750.0 million in convertible senior notes. These risks include potential adverse effects on financial condition if the conditional conversion feature is triggered, dilution to stockholders upon conversion, and counterparty risk related to the associated capped call transactions designed to limit dilution - New risks have emerged related to the July 2025 issuance of $750.0 million in 0.75% Convertible Senior Notes due 2030[325] - Risks associated with the notes include potential dilution to stockholders, downward pressure on the stock price, and the requirement to pay cash upon conversion, which could affect liquidity[326][328] - The company is subject to counterparty credit risk with the financial institutions involved in the associated capped call transactions, which could lead to greater than anticipated dilution if a counterparty defaults[331][332] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the quarter. The company details the use of proceeds from its Initial Public Offering (IPO) in June 2024, which generated net proceeds of $382.0 million. A portion of these funds was used to satisfy tax withholding obligations for RSU settlements and for general working capital - The company completed its IPO on June 17, 2024, selling 11,100,000 shares of Class A common stock at $37.00 per share, resulting in net proceeds of $382.0 million[335] - A portion of the IPO proceeds was used to satisfy tax withholding and remittance obligations related to the net settlement of employee RSUs[336] Other Information This section discloses several significant corporate actions that occurred after the quarter ended. On August 7, 2025, the company reincorporated from Delaware to Nevada. On August 8, 2025, it entered into an 'At the Market' (ATM) sales agreement to offer and sell up to $500 million of its Class A common stock. Additionally, on August 7, 2025, the Compensation Committee granted performance-based restricted stock units (PSUs) to its named executive officers - On August 7, 2025, the company changed its state of incorporation from Delaware to Nevada[341] - On August 8, 2025, the company entered into a Controlled Equity Offering (ATM) Sales Agreement, allowing it to sell up to $500.0 million of Class A Common Stock from time to time[345] - On August 7, 2025, the Compensation Committee granted 2,569,600 Performance-Based Restricted Stock Units (PSUs) to executive officers, vesting based on revenue growth and total shareholder return performance goals over three overlapping periods[178][352][353]