Core Insights - Tempus AI (TEM) reported a non-GAAP profit in Q3 2025, driven by growth in genomics testing and data services, with revenue increasing by 84.7% year over year to $334.2 million and adjusted EBITDA reaching $1.5 million [1][8] - The stock holds a Zacks Rank 3 (Hold) with a VGM Score of D, indicating weaknesses in value but stronger momentum [1][13] Business Mix and Growth Drivers - Genomics revenue more than doubled to $252.9 million, with oncology testing contributing $139.5 million and hereditary testing $102.6 million [2] - Data and services revenue grew by 26.1%, with Insights increasing by 37.6%, and clinical tests delivered reached 217,000, up 33% year over year [2][3] Pricing Catalysts - Management is transitioning a significant portion of xT CDx volume to FDA-approved tracks and plans further FDA submissions, expecting to submit xT for approval by the end of 2025 [4] - These initiatives aim to enhance average selling prices and unit economics over time, although average realized pricing remains below peer levels until approvals are secured [5] Revenue Recognition and Demand - Strong customer demand for Data & Services is evident, with mid-20% booking growth year over year and approximately $150 million in new contracts [6] - However, the multi-year recognition of bookings may delay near-term revenue recognition and margin improvement [7] Profitability and Future Guidance - The company anticipates 2025 revenue of approximately $1.265 billion, implying around 80% annual growth and positive adjusted EBITDA for the full year [8] - Management expects about $20 million of adjusted EBITDA in Q4 2025, with continued EPS improvement projected through 2026 and potential positive EPS in 2027 [11] Financial Position - Tempus AI ended Q3 with $764.3 million in cash and marketable securities, providing the capacity for ongoing investments in AI compute and regulatory initiatives [12] Market Position and Performance Expectations - The stock's Zacks Rank 3 (Hold) and VGM Score of D suggest expectations for market-like performance in the near term, with a focus on estimate revisions related to pricing, FDA decisions, and reimbursement progress [13]

Core Insights - Tempus AI (TEM) experienced a significant quarter with improved diagnostics volumes and pricing, alongside extended data partnerships enhancing visibility [1] - Investors are evaluating growth sustainability against GAAP losses and the timing of multi-year data deal conversions [1] Revenue Growth and Performance - In Q3 2025, revenues surged 84.7% year-over-year to $334.2 million, driven by a 117% increase in genomics to $252.9 million and a 26.1% rise in data and services to $81.3 million [2] - The company conducted 217,000 clinical tests, marking a 33% year-over-year increase, with oncology testing revenue at $139.5 million and hereditary testing at $102.6 million [2] Margin and Profitability Trends - Gross profit increased by 98% to $209.9 million due to higher volumes and improved average selling prices [3] - Adjusted EBITDA reached $1.5 million, a notable improvement from the previous year's loss, although GAAP net loss was substantial at $80.0 million [3] Pricing and Regulatory Developments - Average reimbursement improved by mid-teens percentage per test, narrowing the gap with competitors [4] - Approximately one-third of xT CDx volume is on FDA-approved pathways, with plans to migrate most by 2026, and xF submission for FDA approval expected by the end of 2025 [4] Data Monetization and Future Visibility - Data and services are showing momentum in multi-quarter bookings, which are expected to convert over time, enhancing operating leverage [5] - The company is building a backlog through Compass CRO awards and real-world data collaborations, although the conversion cycle may limit near-term revenue growth [5] Financial Position and Guidance - Tempus AI ended Q3 with $764.3 million in cash and marketable securities, providing sufficient capacity for AI compute, regulatory filings, and commercial investments [6] - For 2025, management anticipates approximately $1.265 billion in revenue and around $20 million in adjusted EBITDA, with a target for positive annual earnings per share by 2027 [6]

Financial Data and Key Metrics Changes - Revenue increased by 89.6% to $314.6 million, with Genomics revenue rising 115% to $241.8 million driven by volume growth in oncology [4][5] - Quarterly gross profit reached $195 million, reflecting a 160% increase, while adjusted EBITDA improved from negative $16 million to negative $5.6 million [5][6] - Full year 2025 revenue guidance was raised to $1.26 billion, with an adjusted EBITDA forecast of approximately $5 million, indicating a $110 million improvement over the previous year [6] Business Line Data and Key Metrics Changes - Genomics revenue growth was primarily attributed to oncology volume growth, which increased from 20% to 26% [4] - Data and Services revenue grew by 35.7% to approximately $73 million, led by a 41% increase in data licensing from Incyte [5] Market Data and Key Metrics Changes - Significant sequential volume growth was observed across the entire oncology testing compendium, with hereditary volumes also exceeding expectations [12][14] - The company is capturing market share from historical players who have reduced their presence in the market, indicating strong tailwinds in the overall space [15] Company Strategy and Development Direction - The company is focused on maintaining growth while approaching adjusted EBITDA breakeven, with plans to continue investing in growth opportunities [6][43] - There is a strong emphasis on AI and data integration into diagnostics, with expectations that this will transform R&D portfolios and patient care [49][52] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of growth, highlighting the importance of long-term strategies over short-term gains [97] - The company anticipates that reimbursement for MRD (Minimal Residual Disease) testing will occur in 2026, which is expected to significantly boost volumes [58][90] Other Important Information - The company issued $750 million of 0.75% convertible notes to reduce interest expenses and improve cash flow [6] - The data business is expected to grow at around 30% for the year, with Q4 typically being the largest revenue quarter [62] Q&A Session Summary Question: Can you elaborate on the strong core genomic volumes in the quarter? - Management noted significant sequential volume growth across oncology testing, driven by sales force efficiencies and technology improvements [12][13] Question: How should we think about the cadence of ASP as you migrate volumes to CDx? - ASPs are expected to see incremental gains as the company approaches its target of migrating 40% of XT volume to CDx by year-end [22] Question: Can you discuss bookings trends for Insights and Trials? - Bookings were strong due to the AstraZeneca Pathos deal, with total contract value up materially [30] Question: What is the pipeline for future partnerships with pharma? - The pipeline remains robust, with no significant pressure from competitors, and the company expects to close large deals in the future [39] Question: How do you balance investments among various parts of the business? - The company aims to maintain discipline in investments while focusing on long-term growth and adjusted EBITDA positivity [43][86] Question: What are the expectations for the back half of the year in the data business? - The data business is expected to grow slightly above 30% for the year, with Q4 anticipated to be the largest revenue quarter [62] Question: How is the liquid biopsy business performing? - The liquid biopsy franchise is growing faster than the market, with a competitive product set [68][70] Question: What is the company's appetite for acquisitions or partnerships? - The company remains opportunistic but disciplined in pursuing acquisitions that align with its strategic goals [78][80] Question: How significant will MRD be in the oncology volumes? - MRD is expected to become a larger part of the business once reimbursement is secured, which will drive unit growth [90][94]

Financial Data and Key Metrics Changes - Quarterly revenue increased by 75.4% year over year to $255.7 million [5] - Genomics revenue reached $193.8 million, reflecting approximately 89% year over year growth [5] - Gross profit for the quarter was $155.2 million, representing 99.8% growth year over year [6] - Adjusted EBITDA improved to negative $16.2 million from negative $43.9 million year over year, an improvement of $27.8 million [6] - Full year 2025 revenue guidance increased to $1.25 billion, indicating about 80% year over year growth [7] Business Line Data and Key Metrics Changes - Oncology testing revenue grew by 31% year over year with approximately 20% volume growth [5] - Hereditary testing contributed $63.5 million in revenue, with unit growth of 23% [6] - Revenue from data and services totaled $61.9 million, marking about 43% year over year growth, led by insights or data licensing business which grew by 58% [6] Market Data and Key Metrics Changes - The company reported a total remaining contract value exceeding $1 billion as of April 30 [9] - The insights business is growing rapidly, with a significant contract with AstraZeneca pushing total remaining contract value over $1 billion for the first time [50] Company Strategy and Development Direction - The company is focused on building the world's largest foundation model in oncology through a three-year $200 million data and modeling license agreement with AstraZeneca and Pathos [8][9] - The strategic partnership aims to enhance drug discovery efforts and advance diagnostic and data products [9][10] - The company is committed to making precision medicine a reality by leveraging AI and large datasets to improve patient outcomes [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's performance, highlighting strong revenue and gross profit growth while managing costs effectively [5][8] - The management noted that the excitement from other pharmaceutical companies regarding the Pathos deal has exceeded expectations, indicating potential for future collaborations [15][16] - The company is cautious about growth rates in the hereditary testing business but sees long-term potential for high growth [24][26] Other Important Information - The company is investing in AI technology and data to enhance its diagnostic capabilities and maintain competitive advantages [39][40] - The acquisition of Deep Six is expected to enhance the company's data connectivity and analytics capabilities [28][32] Q&A Session Summary Question: Follow-up on the Pathos deal and its implications for future collaborations - Management noted significant interest from other pharmaceutical companies following the Pathos deal, with ongoing discussions about similar agreements [15][16] Question: Insights on the Hereditary business performance - Management indicated that the hereditary testing business is performing better than expected, with potential for continued strong growth [24][26] Question: Details on the Deep Six acquisition and its capabilities - The acquisition is aimed at enhancing data connectivity and analytics, which are crucial for building comprehensive molecular datasets [28][32] Question: Impact of macroeconomic factors on TCV and potential cancellations - Management acknowledged some impact on biotech funding but emphasized that relationships with large pharma companies remain strong and committed [70][71] Question: Update on MRD assay performance and expectations - Management reported strong demand for both tumor naive and tumor informed assays, with positive long-term positioning in the MRD space [75][79]

Financial Data and Key Metrics Changes - Quarterly revenue increased by 75.4% year over year to $255.7 million [4] - Genomics revenue reached $193.8 million, reflecting approximately 89% year over year growth [4] - Gross profit for the quarter was $155.2 million, representing a 99.8% growth year over year [5] - Adjusted EBITDA improved to negative $16.2 million from negative $43.9 million year over year, an improvement of $27.8 million [5] - Full year 2025 revenue guidance increased to $1.25 billion, indicating about 80% year over year growth [5] Business Line Data and Key Metrics Changes - Oncology testing revenue grew by 31% year over year, with approximately 20% volume growth [4] - Hereditary testing contributed $63.5 million in revenue, with unit growth of 23% [5] - Revenue from data and services totaled $61.9 million, marking a 43% year over year growth, led by insights or data licensing business which grew by 58% [5] Market Data and Key Metrics Changes - The company reported delivering approximately 158,000 tests in the quarter, with unit growth in the 20% range [45] - The insights business and data services business grew more than 40%, with the insights business specifically growing by 58% [46] Company Strategy and Development Direction - The company announced a three-year $200 million data and modeling license agreement with AstraZeneca and Pathos to build a foundation model in oncology [6] - This agreement is expected to enhance the company's capabilities in precision medicine and data-driven diagnostics [9] - The company aims to leverage AI technology to differentiate its diagnostics offerings and improve patient outcomes [50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the strong demand for hereditary testing and the potential for significant growth in the future [24] - The company is focused on long-term sustained growth rather than short-term fluctuations, emphasizing the importance of maintaining a steady growth trajectory [45] - Management acknowledged the challenges in the biotech funding environment but noted that relationships with large pharmaceutical companies remain strong and committed [70] Other Important Information - The company has over 4,000 connections to high-quality institutions, enhancing its data capabilities [30] - The company is actively investing in AI applications and data infrastructure to support future growth [38] Q&A Session Summary Question: Follow-up on the Pathos deal and its implications for other pharma collaborations - Management noted significant interest from other pharmaceutical companies following the Pathos deal, with ongoing discussions about potential collaborations [14][15] Question: Insights on the Hereditary business performance - Management highlighted that the hereditary business is performing better than expected, with a potential for continued high growth rates [22][25] Question: Details on the Deep Six acquisition and its capabilities - The acquisition of Deep Six is expected to enhance the company's data connectivity and analytics capabilities, allowing for richer data sets [28][30] Question: Clarification on gross margin and ASP improvements related to reimbursement - Management indicated that ASP improvements are expected as the company migrates more volume to FDA-approved versions of assays, but no reimbursement has been baked into current projections [34][35] Question: Assessment of risks in the current macro environment - Management acknowledged some impact on biotech funding but emphasized that relationships with large pharma companies remain stable and committed [68][70] Question: Update on MRD assay performance and expectations - Management reported strong demand for both tumor naive and tumor informed assays, with expectations for strong volumes once reimbursement is secured [72][74]